Bank of India v Svizera Holdings BV

A party alleging that a contract was subject to a condition precedent bears the burden of proving the alleged condition and its terms. Documentary evidence, contemporaneous conduct and the inherent probabilities may establish whether such an agreement was made. Where parties enter and perform a transaction on a shared assumption that it is binding, and one party has relied on that assumption, estoppel by convention may prevent the other from later denying it where denial would be unjust or unconscionable. Unpleaded complaints cannot be advanced as a defence at trial.

Bank of India claimed payment under a restructured interest rate swap incorporating the 1992 ISDA Master Agreement. Svizera Holdings BV alleged that the swap was subject to a condition precedent that Barclays Bank plc would enter into an Indian rupee/US dollar currency swap. It also alleged a collateral agreement and counterclaimed for losses said to result from the absence of that currency swap.

The central issues were whether the alleged agreement existed, whether it applied to the facility or either swap, and whether the original and restructured swaps were binding. The defendant was unrepresented at trial after its adjournment application was refused.

1. Adjournment. The last-minute application to adjourn was refused. The alleged overlap with separate Barclays proceedings, representation difficulties and financial constraints did not establish good reason, and Bank of India would suffer serious prejudice from delay.
2. Alleged condition precedent. Svizera bore the burden of proving that Barclays had agreed to provide an Indian rupee/US dollar currency swap and that this was a condition of the facility or either interest rate swap. Its brief evidence lacked particulars and documentary support. The judge accepted the evidence that the only currency swap proposal was a US dollar/Swiss franc structure, not the alleged Indian rupee/US dollar swap.
3. The contemporaneous documents and the parties’ conduct supported the conclusion that the original and restructured swaps were treated as valid and binding. Svizera had acknowledged payments as due and later sought a variation on the footing that an existing hedge was binding.
4. Estoppel by convention. Even if the alleged representation or agreement had existed, the parties entered into and dealt with the restructured swap on the common assumption that the original and restructured swaps were valid and binding. Given Bank of India’s reliance, including entering into a back-to-back transaction with Barclays and refraining from other protective steps, it would be unjust and unconscionable to allow Svizera to deny that assumption.
5. Unpleaded complaints concerning complexity, lack of experience and alleged compulsion could not be advanced as a defence. In any event, the evidence showed that Svizera and its parent had experience with swaps, were responsible for obtaining advice, and had chosen both the original swap and its subsequent restructure.
6. The alleged condition precedent and collateral agreement were rejected. The original and restructured swaps were binding on Svizera. Bank of India was entitled to judgment for the full sum claimed, plus interest updated to the date of judgment.