Greenclose Ltd v National Westminster Bank Plc

Contractual notice provisions in the 1992 ISDA Master Agreement prescribe the permitted methods of giving notice. They are mandatory, not merely evidential provisions governing deemed effectiveness. Notice must be given by a specified method, using the relevant details in the Schedule, unless those details are changed under section 12(b).

The expression “electronic messaging system” in the 1992 form does not include email. An email sent to an address not specified in the Schedule is therefore ineffective. In any event, where a contractual right to extend a contract is exercised by “giving notice”, the notice must be actually communicated before the contractual deadline.

An unqualified contractual right to extend is not ordinarily subject to implied restrictions based on protection, increased default risk or good faith.

Greenclose entered into a five-year interest rate collar with the Bank as part of the arrangements for a £15 million loan. The Confirmation gave the Bank the right to extend the collar for two further years by giving notice to Greenclose by 11 am on 30 December 2011.

The Bank attempted to send notice by fax, but transmission failed. It then emailed the purported notice to Mr Leach, whose email address was not specified in the ISDA Schedule, and left a voicemail referring to the email. Mr Leach did not see the email or hear the voicemail before the deadline.

The issues were whether the notice provisions permitted email and whether the Bank had otherwise validly exercised its extension right. Greenclose also advanced alternative implied-term and good-faith arguments.

1. Notice provisions. Section 12(a) of the 1992 ISDA Master Agreement, read with Part 4 of the Schedule, prescribed a limited number of permitted methods of notice. The use of “may” gave a choice between those methods, but did not permit other methods. Section 12(b), and the references to the specified address, number or electronic messaging details, supported that construction. Certainty and predictability were especially important in a standard market agreement.
2. The phrase “electronic messaging system” did not include email. The 2001 ISDA amendments and the 2002 Master Agreement showed that email was subsequently introduced as a separate permitted method. No email address had been specified for Greenclose, and no valid amendment had been made under section 12(b).
3. The email was therefore ineffective. The failed fax could not constitute notice. The voicemail was merely a message drawing attention to the email and did not purport to exercise the contractual right. Alternatively, even if section 12(a) were permissive, the email had not been communicated to Greenclose before 11 am.
4. The Bank’s right to extend was absolute and unqualified. The proposed protection, default-risk and good-faith terms were unnecessary, uncertain and inconsistent with the express bargain. English law has no general doctrine of good faith applicable to this arm’s-length contract between sophisticated commercial parties.
5. Greenclose was entitled to judgment. The collar ended on 4 January 2012. The Bank was ordered to repay sums paid under the purported extension, with interest, and its Counterclaim was dismissed.