“6(c) Effect of Designation. i) If notice designating an Early Termination Date is given under section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under section 2(a)(i) or 2(c) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to section 6(e). (d) Calculations. (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event.) Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” or “Loss”, and a payment method, either the “First Method” or the “Second Method”
“The effect of a late notice of details 12. This is a short question of construction which is suitable for determination on a summary judgment application. 13. Mr Yeo accepted that pursuant to clause 6(d) the sum claimed only became payable once adequate details of the sum claimed had been provided. However, he submitted that once those details had been provided the sum claimed was payable, notwithstanding that the details had not been provided "on or as soon as reasonably practicable" following the Early Termination Date. Any other construction would mean that service of adequate details just one day late would mean that the sum claimed was not payable. This would be "commercially absurd". Any lateness in the provision of particulars would give rise to a claim for damages but not to a complete defence to the sum claimed. 14. Mr. Wheeler submitted that the terms of clause 6(d) were clear. An adequate and timely notice was a condition precedent to the sum claimed being payable. In the absence of such a notice the sum claimed was not payable. 15. In my judgment it is necessary to consider the words used by the parties. Clause 6(d)(ii) states that the sum claimed will be payable on the day that notice of the amount payable is effective. When is the notice of the amount payable effective? 16. Both parties accepted that the reference to "notice of the amount payable" was a reference back to the obligation in clause 6(d)(i) to provide a statement. The purpose of the statement required by clause 6(d) is twofold. First, it is to provide the paying party with an explanation of the sum claimed so that he can understand it and, if he wishes, check it (see the judgment of Mr. Knowles CBE QC at paragraph 46). Second, it is to inform the paying party of the account into which the sum must be paid so that he can effect payment. Once sufficient details of both matters have been given the notice is, in my judgment, effective. The fact that it was not served "on or as soon as reasonably practicable" following the Early Termination Date does not render the notice ineffective. It merely renders it "late". 17. It is to be observed that clause 6(d)(ii) does not state that the sum will be payable when a notice compliant with clause 6(d)(i) has been served. If it had done so that would have provided, at least, the foundation for Mr. Wheeler's submission that a late notice was non-compliant and therefore that the sum claimed was not payable. But, by contrast, clause 6(d)(ii) states that the sum is payable when the notice is effective. That requires one to have regard to the purpose of the notice. When one does so the second notice, albeit late, can be seen to be effective. 18. Further, Mr. Wheeler's construction of clause 6(d) means that, following a failure to serve the notice "on or as soon as reasonably practicable" following the Early Termination Date, any later notice will inevitably be ineffective with the result that the sum claimed will never be payable. 19. I consider this construction to be so lacking in commercial sense that it cannot have been the meaning which a reasonable person with the background knowledge available to the parties would have understood the clause to bear. Indeed, it is difficult to conceive of a reason why the parties would have intended that a late notice should be an ineffective notice. By contrast there is commercial sense in a construction pursuant to which a notice is effective if it provides the paying party with the information required by clause 6(d). That is not to say that the provision of a late notice, that is, one which is not served "on or as soon as reasonably practicable" following the Early Termination Date is devoid of legal consequence. It is a breach of contract and so it may found an action in damages if the lateness has caused loss. Although Mr. Wheeler did not suggest that the lateness in this case has caused any loss I do not consider that it can be said that lateness can never cause loss. All will depend upon the circumstances of the case. 20. Finally, my approach to the construction of clause 6(d) is consistent with the policy of the court to give effect to, rather than to invalidate, commercial agreements; see BNP Paribas v Wockhardt EU Operations (Swiss) AG[2009] EWHC 3116 (Comm) per Christopher Clarke J at paragraph 24. 21. It follows from my construction of clause 6(d) that the Claimant is entitled to summary judgment on its claim.”
“must be interpreted as a whole in the light of the commercial intention which may be inferred from the face of the instrument and from the nature of the debtor’s business. Detailed semantic analysis must give way to business common sense”
"…… on general principles the court should not be astute to interpret commercial transactions so as to invalidate them, particularly when … consequential doubt might be cast on other long-standing commercial arrangements": Perpetual Trustee Co Ltd v BNY Corporate Trustees Services and another; Belmont Park Investments Pty Ltd v Corporate Trustee Services Ltd and another[2009] EWHC 1912 (Ch) per Sir Andrew Morritt, QC. "
“…in my judgment it is impossible to say that time was originally of the essence of completion since the agreement does not specify a date for completion or fix a time for completion by reference to a formula which subsequently makes the date capable of exact definition. The only case which might appear to be contrary to this view is the SociM Italo-Belge case where the time was held to be of the essence of a term that declaration of ship be made "as soon as possible”
“25. Section 2 of the Master Agreement is, however, all about the payment obligation and does not, in our view, touch the underlying indebtedness obligation. In particular, section 2(i) obliges each party to make each payment specified in the Confirmation and it is that payment obligation which is, by section 2(a)(iii), made subject to the condition precedent that no event of default has occurred and is continuing.” 26. That this is so is demonstrated by the fact that the Master Agreement provides that, in cases where Early Termination occurs and payments have to be made pursuant to section 6(e) by reference to a payment measure which is to be either "Market Quotation" or "Loss", it is to be assumed that each applicable condition precedent has been satisfied. As already explained (see para 12 (xiii) above) that means that in the event of early termination, the net position of the parties is to be calculated. If in fact no debt obligation ever arose, the calculation envisaged as occurring on early termination could never take place since there would be no obligation of the Non-defaulting party to take into account. 27. Nor does Mr Fisher's argument cater conveniently for Potential Events of Default; these are just as likely to occur as actual Events of Default. It would be very odd if no obligation arose if a Potential Event of Default had occurred on or before a due date for payment but that fault was cured the day after the due date. Mr Fisher would no doubt say that the debt and the obligation to pay it did arise but would be extinguished if the Potential Event of Default became an actual Event of Default but it is most unlikely that the parties could have intended that the indebtedness should come into existence for one kind of default but not for the other. 28. A similar argument to that advanced by Mr Fisher was submitted to Gloster J by Mr Jonathan Crow QC in Pioneer Freight Co Ltd v TMT Asia Ltd[2011] 2 Lloyds Rep 96 , a case about FFAs decided after the decision of Briggs J in the present case, at any rate in his oral reply (see para 72). It was rejected by her for much the same reasons as we have set out. She said in para 91 "Once one approaches the analysis on the basis that, under Section 2(a)(iii), one is only looking at the payment obligation, rather than the debt obligation, the whole machinery makes sense. Thus, the wording of Section 2(a)(iii) makes it clear that the payment obligation is subject to the condition precedent that no Event of Default or Potential Event of Default has occurred "… and is continuing". The natural reading of those words envisages that once a condition precedent is fulfilled, the obligation to pay revives. There is no need for any further creation of the debt obligation itself, as Mr. Crow seeks to suggest" We would respectfully adopt those observations of Gloster J and hold that the underlying debt obligation is undisturbed by the Event of Default; it is merely the payment obligation which is barred if there is an Event of Default. We turn therefore to the next question which is whether the obligation to pay is extinguished or is merely suspended so that it can and will revive if the Event of Default is cured before termination by either party or on the maturity of the transaction.” ……. We would therefore decide that the payment obligation of the Non-defaulting Parties is suspended (rather than extinguished) during the currency of an Event of Default under the Master Agreement and will revive if the Event of Default is cured at any time before the outstanding Transactions are terminated. The question then arises whether the payment obligation revives at any other time while the contract continues to exist and whether (if not) the obligation is extinguished when the contract arrives at its contractual maturity date.”
“12. The calculation of interest on the principal sum of $US16,719,459 ANZ submits that it is entitled to interest on any sums outstanding from SG. SG accepts that it must pay interest but there is a dispute as to the rate payable. SG agrees that during the period between the agreed early termination date of the NDFs (24 September 1998 ) and5 October 1998 , the rate of interest should be the contractual 'Termination Rate'. ANZ submits that for the period after5 October 1998 SG must pay interest at the 'Default Rate' as defined in the ISDA Master Agreement. ANZ say that under the terms of section 6(d)(i), upon an early termination of the NDFs, each party has to provide a statement to the other of the calculations which it has made in accordance with section 6(e). In the present case that means each party must produce a calculation of loss (or gain) according to the 'Loss' provisions of the ISDA Master Agreement and the 'Two Affected Parties' provisions in section 6(e)(ii)(2)(B). ANZ next submits that under section 6(d)(ii) ('Payment Date') the amount so calculated to be due must be paid two business days after the day on which the notice was effective. In this case ANZ served its notice on1 October 1998 so, ANZ submits, the 'Payment Date' was5 October 1998 . SG did not pay the amount due to ANZ (which originally was $US16,719,459) on 5 October. Accordingly, ANZ submits, under section 6(d)(ii) and section 14, the definition section of the ISDA Master Agreement, the 'Applicable Rate' of interest on sums outstanding after the 'Payment Date' is the 'Default Rate'. The 'Applicable Rate' of interest is defined as being the 'Default Rate' in circumstances when — 'in respect of an obligation to pay an amount under section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate.' 13. Mr Nash for SG submits that a party does not have the right to be paid on the 'Payment Date' in accordance with section 6(d)(ii) until a notice of the amount payable is effective. But in the present case neither side produced a notice of the amount payable because of the dispute as to how the losses of SG should be calculated. The calculation of SG, even if it is ultimately found to be wrong, was, in the words of the 'Loss' clause, 'reasonably determined [by SG] to be its total losses and costs'. Therefore if the parties, in good faith, fail to agree on the amount payable in accordance with section 6(e), and so no effective notice was produced, then no 'Payment Date' can be determined. Therefore the 'Payment Date' will only arrive upon the court's determination of the proper basis for calculating SG's losses. Until that time SG is not in default and so does not have to pay the 'Default Rate'. 14. Mr Lenon for ANZ responds with two arguments. First he submits that the failure by SG to calculate its losses correctly and to serve an effective notice in accordance with section 6(e)(ii)(2)(B) and section 6(d) respectively were breaches of contract by SG. Either as a matter of law or upon the proper application of the terms of the NDFs, SG cannot rely on its own breaches of contract to prevent the 'Payment Date' accruing, and so avoid having to pay interest at the 'Default Rate'. He relies on the principles reiterated by the House of Lords in Alghussein Establishment v Eton College[1991] 1 All ER 267 ,[1988] 1 WLR 587 . Mr Lenon also submitsithere is a further consequence of the failure of SG to serve a notice correctly calculating its losses, which, he says, was a breach of contract. The result of the breach was that time for calculating the arrival of the 'Payment Date' did not start to run and ANZ has therefore suffered a loss; namely the difference between the 'Non-default Rate' and the 'Default Rate' of interest. That loss was something that was contemplated by the parties when the contracts were concluded. 15. In my view section 6(d)(i) envisages that each party will serve a statement of any amount payable to one party or the other under section 6(e). I think this must follow from the wording of section 6(d)(i), which states that the calculation must specify '(1) … any amount payable under Section 6(e) and (2) giving details of the relevant account to which any amount payable to it is to be paid' (my emphasis). Therefore ANZ was entitled and obliged to serve a statement on SG of the amounts payable to ANZ following the early termination of the NDFs. Although SG was also obliged to serve a similar statement, its failure to do so does not affect the validity of the statement made by ANZ. There is nothing in section 6(d)(i) or (ii) or section 12j to indicate that the two parties' statements must agree before there can be a notice of the amount payable to one party or the other. This is not surprising, as in some cases there will only be one 'Affected Party' (see section 6(e)(ii)(1)) and so only that party will have to make a calculation and serve a statement. 16. ANZ gave SG a notice on 1 October calculating its loss at $US16,719,459. SG provided ANZ with its calculations on1 October 1998 and explained them on 2 October. In a further letter to SG on2 October 1998 ANZ said that it disagreed with SG's calculations and asked it to reformulate SG's 'losses'. ANZ also stated that until it received a statement of SG's losses then 'no calculation under Section 6(e)(ii)(2)(B) of the master agreement may be made'. I disagree with that view of section 6(e)(ii)(2)(B). That wording states only how to calculate the sum payable in a case where the 'Two Affected Parties' and 'Loss' regime applies. It does not state that time for the calculation of the 'Payment Date' will only run if each party has served on the other its 'Loss' calculations. I think that time runs once a calculation has been served stipulating the amount payable to one party as set out in section 6(d)(i) and (ii), provided that the calculation is either agreed or (retrospectively) once the court ultimately finds that the calculation served is correct. If it were otherwise one party could always claim that the 'Payment Date' could never arrive if the calculation of the amounts due were disputed, provided that party's calculation was made in good faith. Further, in my view, if the calculation was made in good faith, as required by the 'Loss' provision, then the party making it would not be in breach of contract as submitted by Mr Lenon. So there is no room for the application of the principles in Alghussein Establishment v Eton College. 17. Because ANZ considered that it could not produce a notice under section 6(d)(i) until SG had provided details of its 'Loss' in a form with which ANZ could agree, ANZ never sent a notice giving details of the account into which the amount it thought due to it should be paid. Does that stop time running so that the 'Payment Date' cannot arrive? I have concluded that it does not. Neither section 6(d)(i) or (ii) state that service of a particular form of notice is a condition precedent to the accrual of the 'Payment Date'. The important information that has to be given in a notice (under section 6(d)(i)) is calculation of the amount payable to the party claiming payment under section 6(e). In my view a reasonable person having the background knowledge available to forex dealers who considered the language of these terms would say that the failure to give details of the precise account into which money should be paid would not prevent the notice becoming effective so that the 'Payment Date' could arrive. 18. Therefore in the present case I think that once ANZ had rejected the SG calculation on2 October 1998 , the notice of its calculations of what was due was sufficient to start time running under section 6(d)(ii). Therefore the 'Payment Date' would be on the two local business days after the day on which the notice of 2 October was served. This makes the 'Payment Date' 5 October, as ANZ have always contended. As SG did not pay the amount that ANZ claimed was due to them on that date and I have found that ANZ were correct in their calculation, the 'Default Rate' must apply after that date.”
“However, this breach of contract on the part of ARIC [the Non-defaulting Party] has no impact on the validity or otherwise of the calculation of loss itself. Mr Nash [Leading Counsel for LBF] accepted that the lateness in the provision of the calculation statement did not affect the binding nature of the calculation of Loss, if it was otherwise valid.”