SNCB Holding v UBS AG

SNCB Holding v UBS AG

The ADA and Security Agreement did not require UBS to deliver to SNCB the Ambac Municipal Bonds held in the Collateral Account at the time of the Credit Event. There was no express or implied term linking the Collateral Account contents to the Delivery Portfolio. UBS was contractually entitled to manage the Collateral Account, including substituting cash or other bonds, provided the mark to market value requirements were met. The Delivery Portfolio could be constituted from any qualifying bonds of the Affected Reference Entity. UBS’s actions did not breach the contract or constitute an abuse of discretion. SNCB’s claim fails on construction and implication of terms.

Parties
Claimant: SNCB Holding; Defendant: UBS AG
Jurisdiction
England and Wales
Judgment Date
20 July 2012
Procedural Posture
Commercial Contract Dispute / Judgment After Trial
Outcome
Claim dismissed
Legal Topics
Implied Terms, Exercise of Contractual Discretion, Credit Linked Deposit Agreements, Collateral Management, Breach of Contract
Contract Law Banking and Finance Implied Terms Exercise of Contractual Discretion Credit Linked Deposit Agreements Collateral Management Breach of Contract

Case Brief

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Parties

SNCB Holding

Claimant

UBS AG

Defendant

Procedural Posture

Commercial Contract Dispute / Judgment After Trial

Legal Issues

  1. 1 Whether, on the true construction of the Deposit Agreement and/or by way of an implied term, SNCB was entitled to receive and UBS was obliged to deliver to SNCB the Ambac Municipal Bonds contained in the Collateral Account at the time of or following a Credit Event as part of the Delivery Portfolio.
  2. 2 Whether UBS’s removal of the Ambac Municipal Bonds from the Collateral Account, replacement with cash, transfer of the Terwin Bonds into the Collateral Account and delivery of them to SNCB was an impermissible exercise of UBS’s discretion amounting to a breach of the Deposit Agreement.
  3. 3 Whether UBS’s breaches of the Deposit Agreement have caused SNCB any recoverable loss and, if so, the quantum of SNCB’s loss.

Ratio Decidendi

The ADA and Security Agreement did not require UBS to deliver to SNCB the Ambac Municipal Bonds held in the Collateral Account at the time of the Credit Event. There was no express or implied term linking the Collateral Account contents to the Delivery Portfolio. UBS was contractually entitled to manage the Collateral Account, including substituting cash or other bonds, provided the mark to market value requirements were met. The Delivery Portfolio could be constituted from any qualifying bonds of the Affected Reference Entity. UBS’s actions did not breach the contract or constitute an abuse of discretion. SNCB’s claim fails on construction and implication of terms.

Court Disposition

Claim dismissed

Orders

  • Claim dismissed in its entirety. Costs to follow the event, subject to further submissions if not agreed.