Videocon Global Ltd (1st Appellant) Videocon Industries Ltd (2nd Appellant) v Goldman Sachs International
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Mr Justice Cranston,Sir Stephen Richards |
| Judgment Date | 15 March 2016 |
| Neutral Citation | [2016] EWCA Civ 130 |
| Docket Number | Case No: A3/2015/0105 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 March 2016 |
[2016] EWCA Civ 130
Lady Justice Gloster
Mr Justice Cranston
and
Sir Stephen Richards
Case No: A3/2015/0105
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE,
QUEEN'S BENCH DIVISION, COMMERCIAL COURT
THE HON. MR JUSTICE TEARE
2012FOLIO1049
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Giles Wheeler (instructed by TLT LLP) for the Appellants
Miss Sonia Tolaney QC and Mr Nik Yeo (instructed by Allen & Overy LLP) for the Respondent
Hearing dates: Thursday 3 December 2015
Introduction
This is an application for permission to appeal, and, if permission is granted, an appeal, by the defendants to the action, Videocon Global Limited ("Global"), and Videocon Industries Limited ("Industries") (collectively "the appellants"), against the decision of Teare J, dated 19 December 2014, and reported under neutral citation number [2014] EWHC 4267 (Comm) ("the judgment"), in which he granted summary judgment to the claimant, Goldman Sachs International ("Goldman"), against the appellants in the sum of US $4,066,542.90, together with interest and expenses.
The appeal turns on a short point of construction of a key provision (section 6) of the 1992 (Multicurrency – Cross Border) ISDA Master Agreement ("the Master Agreement"). The Master Agreement is a standard form agreement which is "very widely used in international financial markets in all types of derivative transactions" (per Christopher Clarke J (as he then was) in BNP Paribas v Wockhardt EU Operations (Swiss) AG [2009] EWHC 3116 (Comm), at [23]) and it was common ground that its provisions fall to be interpreted in that context.
Capitalised terms which appear in this judgment are references to defined terms in the Master Agreement. All passages in bold in this judgment are my own emphasis.
Section 6 contains the ISDA "close out" provisions. The purpose of these provisions is to provide a contractual mechanism for (a) calculating the amount due upon the (early) termination of multiple transactions – as a single payment due from one party to the other; and (b) facilitating the prompt payment of such amount.
The issue raised by the appeal is whether there is any applicable time limit to a notice given under section 6(d) of the Master Agreement requiring payment of the sum calculated pursuant to section 6(e) as due following an Early Termination.
Mr Giles Wheeler appeared on behalf of the appellants (as he had done on both the summary judgment applications below). Miss Sonia Tolaney QC and Mr Nik Yeo appeared on behalf of Goldman (Mr Yeo alone having appeared on the summary judgment applications below).
At the conclusion of Mr Wheeler's arguments on behalf of the appellants, the court indicated that, because of the importance of the issue to the market, and not because it considered that the appeal had any real prospect of success, it would give permission to appeal, but that, having heard such arguments, and having reas the written submissions of, but without hearing from Miss Tolaney QC, on behalf of Goldman, it would dismiss the appeal. This judgment sets out my reasons for dismissing the appeal.
The operation and relevant terms of the Master Agreement
The critical terms of the Master Agreement for the purposes of this appeal are sections 6(c), 6(d) and 6(e), section 12 and the definition of "Loss" contained in section 14. They are as follows:
"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". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event of Default:-
……
(4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day.
……
14. ……
"Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or re-establishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)( 1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine...
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