Goldman Sachs International v Videocon Global Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr. Robin Knowles CBE |
| Judgment Date | 20 September 2013 |
| Neutral Citation | [2013] EWHC 2843 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2012 Folio 1049 |
| Date | 20 September 2013 |
[2013] EWHC 2843 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr. Robin Knowles CBE QC
(Sitting as a Deputy High Court Judge)
Case No: 2012 Folio 1049
Mr. Nik Yeo (instructed by Allen & Overy LLP) for the Claimant
Mr. Giles Wheeler (instructed by TLT LLP) for the Defendant
Introduction
The Claimant ("Goldman Sachs") seeks summary judgment against the First Defendant ("Videocon Global") for sums said to be due on the termination of two currency option transactions ("the Transactions").
Against the Second Defendant ("Videocon Industries"), Goldman Sachs seeks summary judgment for sums said to be due on a guarantee of the liabilities of Videocon Global in respect of the Transactions ("the Guarantee"). With one exception (considered below) no separate issues arise on the Guarantee claim, with the result that the claims stand or fall together. I will use the term "Videocon" when describing the Defendants together.
For the Transactions, Goldman Sachs and Videocon Global contracted on the basis of the 1992 (Multicurrency — Cross Border) form of ISDA Master Agreement, with the 1995 (Bilateral Form –Transfer, English Law) form of ISDA Credit Support Annex (together, "the ISDA Master Agreement"). A Schedule to the ISDA Master Agreement provided for the Transactions to be governed by English Law.
On 23 November 2011 Goldman Sachs demanded payment of US$ 840,000 by Videocon Global by way of margin call as Eligible Credit Support under the Credit Support Annex. It is Goldman Sachs' position that the margin was not paid in time, or at all. Goldman Sachs delivered a "Notice of Potential Event of Default" dated 28 November 2011 and then a notice designating an Early Termination Date ("the Early Termination Notice"). The latter designated "2 December 2011 or, if this notice is not effective on such date, the next Local Business Day on which the notice is effective under Section 12(a) of the ISDA Master Agreement, as the Early Termination Date" in respect of the Transactions. Relying on a statement it has made under Section 6(d) of the ISDA Master Agreement, Goldman Sachs claims US$ 4,066,542.90 together with interest and expenses.
Videocon Global contends that by the time that the Early Termination Notice was delivered the 23 November 2011 margin call was no longer effective, and also that it had in any event tendered performance of any obligation to pay the margin demanded. It further contends that the Early Termination Notice was not delivered until after close of business on 2 December 2011 and was not effective in designating 2 December as the Early Termination Date. Moreover, according to Videocon Global, the Early Termination Notice did not effectively designate a date later than 2 December 2011 as an Early Termination Date.
Finally, Videocon does not accept that any liability or loss is in the sum calculated by Goldman Sachs. This last issue involves some examination of the requirements for a statement under Section 6 of the 1992 (Multicurrency — Cross Border) form of ISDA Master Agreement if such a statement is to be used to determine quantum on an Event of Default.
The Margin Calls
The validity of the 23 November 2011 margin call (by way of Eligible Credit Support under the Credit Support Annex) is common ground. It obliged Videocon Global to pay US$ 840,000 by 25 November 2011, and it is common ground that the payment was not made by that time. Videocon admit that at 3pm on 28 November 2011 a "Notice of Potential Event of Default" was served on Videocon Global by Goldman Sachs, requiring payment of the margin call within 1 Local Business Day and that payment of the margin call was not made within that time.
However also on 28 November 2011 another margin call was made by Goldman Sachs. This was for US$ 1,470,000. And between that margin call and the margin call on 23 November 2011 two other margin calls had also been made; one for US$ 660,000 on 24 November 2011 and one, on 25 November 2011, for US$ 380,000 in addition to the US$ 840,000 demanded on 23 November 2011. Videocon argue that the later margin calls superseded the earlier ones. Videocon contend that the "Notice of Potential Event of Default" on 28 November (and the later Early Termination Notice), each being based on a failure to pay the earliest of the margin calls, were ineffective because the earliest margin call did not remain effective and an obligation to make payment of the margin demanded did not remain outstanding.
The ISDA Credit Support Annex anticipates and allows for successive margin calls to be made. Daily calculations of Exposure will often produce different figures as currencies move. At no stage over the period from the margin call on 23 November 2011 did Goldman Sachs do anything that was capable of causing Videocon Global to understand that the margin call was withdrawn. That is true even of the fact that the margin call on 24 November 2011 was for a lesser sum, because the relevant Margin Call Notices made plain that the margin calls were based on different valuation dates.
If there was any room for doubt, doubt did not survive an email dated 24 November 2011 in which Goldman Sachs advised Videocon Global in terms that "although we have issued a call for cob 23 November 2011 below, our call for cob 22 November 2011 is still pending". And when Goldman Sachs emailed Videocon Global on 25 November 2011 requesting confirmation whether Videocon Global agreed to pay US$ 840,000 for value 25 November 2011, the reply was "OK".
That reply was from Mr Sanjay Chudnaik, Finance Manager of Videocon Global. In a witness statement dated 30 April 2013 he gives this account:
"On receipt of the [first] Margin Call Notice [of 23 November], we started the internal process of arranging for transfer from [Videocon Industries] to [Videocon Global] of USD 840,000 to meet the call notice requirements. At the time, the Chief Financial Officer of [Videocon Global], Mr Hegde and I were communicating with Mr Thakore of [Goldman Sachs], and we informed him that the process of arranging payment was underway.
Mr Hegde and I kept Mr Thakore generally informed on progress with the arrangement of payment. There was very little, if any, written communication with Mr Thakore. He would call at our offices and discuss in person with me and Mr Hegde.
We then received another Margin Call Notice on 28 November 2011 … which, by its terms, necessarily superseded the 23 November 2011 Margin Call Notice. This time the Margin Call was for USD 1,470,000 (instead of the USD 840,000 called for in the 23 November 2011 Notice). This put to waste all our previous efforts to arrange payment of USD 840,000, and the process of arranging payment of the increased amount had to be started all over again. We immediately started that process, and we informed Mr Thakore that, in accordance with the new Margin Call Notice, we had stopped arranging payment of USD 840,000 and started arranging payment of USD 1,470,000.
Mr Thakore telephoned me in relation to the new Margin Call Notice. I remember asking him to confirm that the Margin Call Amount was now USD 1,470,000 and not USD 840,000, and he confirmed the same."
Several points bear emphasis in relation to that account. First, it contains no suggestion that Videocon Global thought it was liable to pay less than US$ 840,000 after the margin call for US$ 660,000 on 24 November 2011. Second, the account makes clear that by the time of the margin call on 28 November 2011 Videocon Global had not completed what Mr Chudnaik describes as "efforts to arrange payment of USD 840,000". Third, the account offers no explanation why Videocon Global could not have proceeded to pay US$ 840,000 and then pay the additional sum required by the margin call for US$ 1,470,000.
Alleged tender of performance
Videocon next contends that at the time that the Early Termination Notice was delivered Videocon Global had tendered performance of any obligation to pay the margin demanded.
Mr Giles Wheeler, Counsel for Videocon, argues in his written submissions that tender was made "by Videocon faxing instructions to its bank to make the requisite payment to [Goldman Sachs] in circumstances in which [Goldman Sachs] knew that the instructions had been sent". In giving those instructions, Mr Wheeler argues, Videocon Global had performed its obligation to make payment to Goldman Sachs as far as it was able to do; all that remained was for the money to work its way through the banking system; no further action from Videocon Global was required for that to happen.
I mean no disrespect when I say that in my view this argument has no foundation. It was for Videocon Global to pay Goldman Sachs. An instruction by Videocon Global to its own bank, with the potential for alteration of instruction, delay in compliance with instruction, refusal to comply with instruction, and more, does not begin to meet that obligation.
Dixon v Clark (1848) 3 CB 365 is relied upon by Mr Wheeler in support of the argument. Delivering the judgment of the Court, Wilde CJ said this:
"In actions of debt and assumpsit, the principle of the plea of tender, in our apprehension, is, that the defendant has always been ready (toujours prist) to perform entirely the contract on which the action is founded; and that he did perform it, as far as he was able, by tendering the requisite money; the plaintiff himself precluded a complete performance, by refusing to receive it. And, as in ordinary cases, the debt is not discharged by such tender and refusal, the plea must not only go on to allege that the defendant is still ready (uncore prist), but must be accompanied by a profert in curiam of the...
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