“If:……..(b) a Regulatory Change occurs in respect of [UniCredit], provided that [UniCredit] has obtained the prior consent from [Barclays], such consent to be determined by [Barclays] in a commercially reasonable manner…….. [UniCredit] may, by not less than 5 Business Days notice to [Barclays], designate……… the next following Payment Date as an Optional Early Termination Date.”
“in the determination of [UniCredit]…………[UniCredit] will be subject to less favourable regulatory capital treatment with respect to this Guarantee, [the portfolio obligations]………and/or the amount of regulatory capital freed up in respect of [the portfolio obligations]….”
“20.1 This Guarantee, together with the Credit Support Agreement, constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.”
“ 60 When a contract allocates only to one party a power to make decisions under the contract which may have an effect on both parties, at least two questions arise. One is, what if any are the limitations on the decision-maker's freedom of decision? …………. 61 The answer to the first question is illustrated by cases such as the following. In Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The Product Star) (No 2) [1993] I Lloyd's Rep 397 the charterparty contained a clause which gave charterers the right to alter the destination of the cargo in circumstances where the contractual port of loading or discharge was blockaded owing to war and "the loading or discharging of cargo at any such port be considered by the Master or the owner in his or their discretion dangerous". The trial judge, upheld by the Court of Appeal, held that the owners' purported decision under this clause was wholly unwarranted, and that in fact they did not consider it dangerous to proceed to the contractual loading port. Leggatt LJ, with whom Balcombe and Mann LJJ agreed, said about the content of the owners' power, at p 404: "For purposes of judicial review the court is concerned to judge whether a decision-making body has exceeded its powers, and in this context whether a particular decision is so perverse that no reasonable body, properly directing itself as to the applicable law, could have reached such a decision. But the exercise of judicial control of administrative action is an analogy which must be applied with caution to the assessment of whether a contractual discretion has been properly exercised. The essential question always is whether the relevant power has been abused. Where A and B contract with one another to confer a discretion on A, that does not render B subject to A's uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it must be conferred, it must not be exercised arbitrarily, capriciously, or unreasonably. That entails a proper consideration of the matter after making any necessary inquiries. To these principles, little is added by the concept of fairness: it does no more than describe the result achieved by their application." 62 Ludgate Insurance Co Ltd v Citibank NA [1998] Lloyd's Rep IR 221 concerned an agreement by which the London Market Letter of Credit Scheme was operated by Citibank. In certain circumstances the agreement gave to the bank the rights "to retain in the account(s) such additional margin as it considers appropriate in all the circumstances" and to "allocate the drawing(s) . . . in such manner as the bank considers appropriate in its sole discretion": p 221. Waller J and this court held that Citibank had exercised its decision-making rights in accordance with the purposes for which they were granted. Brooke LJ, with whom Mummery and Russell LJJ agreed, said, at paras 35-36: "For purposes of judicial review the court is concerned to judge whether a decision-making body has exceeded its powers, and in this context whether a particular decision is so perverse that no reasonable body, properly directing itself as to the applicable law, could have reached such a decision. But the exercise of judicial control of administrative action is an analogy which must be applied with caution to the assessment of whether a contractual discretion has been properly exercised. The essential question always is whether the relevant power has been abused. Where A and B contract with one another to confer a discretion on A, that does not render B subject to A's uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it must be conferred, it must not be exercised arbitrarily, capriciously, or unreasonably. That entails a proper consideration of the matter after making any necessary inquiries. To these principles, little is added by the concept of fairness: it does no more than describe the result achieved by their application." 35. It is very well established that the circumstances in which a court will interfere with the exercise by a party to a contract of a contractual discretion given to it by another party are extremely limited. We were referred to Weinberger v Inglis[1919] AC 6 o6; Dundee General Hospitals Board of Management v Walker[1952] 1 All ER 896 ; Docker v Hyams[1969] 1 Lloyd's Rep 487 and Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd (The Product Star) (No 2)[1993] 1 Lloyd's Rep 397 . These cases show that provided that the discretion is exercised honestly and in good faith for the purposes for which it was conferred, and provided also that it was a true exercise of discretion in the sense that it was not capricious or arbitrary or so outrageous in its defiance of reason that it can properly be categorised as perverse, the courts will not intervene. "36. Mr Rowland sought to derive comfort from some of the language used by Leggatt LJ, with whom the other members of this court agreed, in The Product Star (No 2) at p 404 in support of a contention that the courts are more ready to apply a standard of objective reasonableness when assessing whether a discretionary decision can stand. That Leggatt LJ had not the slightest intention of watering down the well-established test is manifest from the passages of his judgment (at pp 405 RHC, 406 RHC and 407 RHC) in which he applied the law to the facts, where it is clear that he is using the epithet 'unreasonable' to characterise a view which no reasonable decision-maker could reasonably have formed on the material before him." 63 Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [200I] 2 All ER (Comm) 299 concerned the claims co-operation clause in a facultative reinsurance policy. The clause required the prior approval of the reinsurers for any settlement or compromise of an underlying loss. The issue was raised whether it was to be implied that reinsurers could not withhold such approval unless they had reasonable grounds for doing so. This court, in a judgment given by Mance LJ (in which Latham LJ and Sir Christopher Staughton shared), held that no such implication was to be made. Mance LJ said, at paras 64, 67 and 73: "64. I gain some assistance by analogy from these cases. In all of them, it seems to me that what was proscribed was unreasonableness in the sense of conduct or a decision to which no reasonable person having the relevant discretion could have subscribed . ." "67 . . . I would therefore accept as a general qualification, that any withholding of approval by reinsurers should take place in good faith after consideration of and on the basis of the facts giving rise to the particular claim and not with reference to considerations wholly extraneous to the subject matter of the particular reinsurance." “73. If there is any further implication, it is along the lines that the reinsurer will not withhold approval arbitrarily, or (to use what I see as no more than an expanded expression of the same concept) will not do so in circumstances so extreme that no reasonable company in its position could possibly withhold approval. This will not ordinarily add materially to the requirement that the reinsurer should form a genuine view as to the appropriateness of settlement or compromise without taking into account considerations extraneous to the subject matter of the reinsurance." 64 Paragon Finance plc v Nash [2002] I WLR 685 concerned a variable interest clause in a mortgage agreement. The issue was whether the discretion given to the mortgagee to vary the interest rate was subject to an implied term that it was bound to exercise the discretion "fairly as between both parties to the contract, and not arbitrarily, capriciously or unreasonably". Dyson LJ, with whom Thorpe LJ and Astill J agreed, accepted a limited implication in which "unreasonably" was understood in a sense analogous to the Wednesbury sense. That was the sense in which Leggatt LJ had used the expression in The Product Star (No 2): see paras 37-38. Dyson LJ concluded, at para 41: "41. So here too,"—referring to Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2)—"we find a somewhat reluctant extension of the implied term to include unreasonableness that is analogous to Wednesbury. I entirely accept that the scope of an implied term will depend on the circumstances of the particular contract. But I find the analogy of the Gan Insurance case and the cases considered in the judgment of Mance LJ helpful. It is one thing to imply a term that a lender will not exercise his discretion in a way that no reasonable lender, acting reasonably, would do. It is unlikely that a lender who was acting in that way would not also be acting either dishonestly, for an improper purpose, capriciously or arbitrarily. It is quite another matter to imply a term that the lender would not impose unreasonable rates." …………………………………………………… 66 It is plain from these authorities that a decision-maker's discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for o instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time. In the latter class of case, the concept of reasonableness is intended to be entirely mutual and thus guided by objective criteria. Gloster J was therefore, in my judgment, right to put to Mr Millett in the passage cited at para 57 above the question whether a distinction should be made between the duty to take reasonable care and the duty not to be unreasonable in a Wednesbury sense; and Mr Millett was in my judgment wrong to submit that it made no difference which test was deployed. Laws LJ in the course of argument put the matter accurately, if I may respectfully agree, when he said that pursuant to the Wednesbury rationality test, the decision remains that of the decision-maker, whereas on entirely objective criteria of reasonableness the decision-maker becomes the court itself. A similar distinction was highlighted by Potter LJ in Horkulak[2005] ICR 402 para 51. For the sake of convenience and clarity I will therefore use the expression "rationality" instead of Wednesbury-type reasonableness, and confine "reasonableness" to the situation where the arbiter on entirely objective criteria is the court itself.”
“222. In support of the applicability of such cases to commercial agreements, the Claimants relied upon the case of British Gas Trading Limited v Eastern Electricity, The Times,29 November 1996 , which concerned a long-term gas supply contract which required the customer's consent to any assignment of the supplier's rights and obligations under the contract, such consent not to be unreasonably withheld. The question for the Court was whether it was reasonable for the customer to withhold its consent, in circumstances where the supplier was undergoing a reorganisation (following a report by the Monopolies and Mergers Commission Report) and the resulting change in control would entitle the customer to terminate the contract in any event, unless the contract was first assigned. At first instance, Colman J made extensive reference to the landlord and tenant authorities and concluded that, in the circumstances of that case, consent to the assignment was being unreasonably withheld. That decision was upheld on appeal:[1996] EWCA Civ 1239 . 223. The Claimants submitted that of particular importance in this case are the following principles, to be derived from the above authorities: i) First, the burden is upon 3M to show that the Claimants' refusal to consent to the cessation of the Acolyte business was unreasonable. ii) Second, it is not for the Claimants to show that their refusal of consent was right or justified, simply that it was reasonable in the circumstances. iii) Third, in determining what is reasonable, the Claimants were entitled to have regard to their own interests in earning as large an Earn Out Payment as possible. iv) Fourth, the Claimants were not required to balance their own interests with those of 3M, or to have any regard to the costs that 3M might be incurring in connection with the ongoing business of Acolyte. ……………………………… 228. 3M disputed the applicability of principles derived from landlord and tenant cases to a commercial agreement such as the SPA. However I accept, as Colman J did in the British Gas Trading Limited v Eastern Electricity case, that they provide some assistance and that the approach set out in paragraph 223 is appropriate in this case.”
“This Guarantee, together with the Credit Support Agreement, constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.”
“ The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations, some (chance) remark or statement (often long-forgotten or difficult to recall or explain) upon which to found a claim, such as the present, to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search, and the peril to the contracting parties posed by the need in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that, accordingly, any promises or assurances made in the course of the negotiations (which in the absence of such a clause, might have effect as a collateral warranty) shall have no contractual force, save in so far as they are reflected and given effect in the document.”