The "Wight" decision: rectification claim succeeds to assist Claimant in swaps litigation

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The "Wight" decision: Rectification claim succeeds to assist Claimant in swaps litigation

Published 28 April 2016

LSREF III Wight Limited v Millvalley Limited [2016] EWHC 466 (Comm)


LSREF III Wight Limited ("Wight"), the Claimant is an Irish company that was the successor in title to a claim for an early termination payment. The original agreement was made by Anglo Irish Bank plc ("AIB"), which was later succeeded by Irish Bank Resolution Corporation Ltd ("IBRC"), which later assigned the agreement to Wight. Wight then subsequently brought the claim for the "Early Termination Amount" of £4,282,518.90, which it argued was owed after an early repayment event.

Millvalley Limited ("Millvalley"), the Defendant is one of a group of Isle of Man companies, which included Glen Properties Limited ("Glen") and LNC Developments ("LNC"). Millvalley entered in to the swap as hedge for its loan facilities agreed with AIB/IBRC.

Millvalley refinanced with AIB in 2006 which involved entering into a swap. Millvalley subsequently restructured the financing of its business and sought to repay the loan, and formalise an ISDA Master Agreement and schedule (in the 2002 form). It was also Millvalley's intention to sell one of the properties owned by the group and close off the swap. 

The Master ISDA Agreement and schedule (in the 2002 form) was supposed to govern the relationship from late 2011 onwards.

However, it emerged that a mistake had been made in the documents that formed the "Restructured Swap Confirmation", which meant the renegotiated agreements were in a long form confirmation, which did not incorporate the ISDA Master Agreement and schedule (in the 2002 Form).

The key differences between the ISDA 1992 and 2002 versions was that the 2002 version had an "Additional Termination Event", which meant in the event that Millvalley/Glen repaid the loans early, AIB/IBRC could terminate the swap and claim an Early Termination Amount under the terms of the Schedule to the Master Agreement.

History of the restructured financing arrangements

10 November 2006

Millvalley and Glen entered in to "the Original Swap" with Anglo Irish Bank Corporation Plc ("AIB") which included a hedging arrangement for a £33.7 million facility with a termination date of 10 November 2016. Additional financing was agreed with Glen via AIB's associate company Anglo Irish Asset Finance Plc ("AIAF"). The swap was a hedging instrument against loans secured on two properties owned by the group.

2 January 2007

"Original Swap Confirmation" is agreed. The 1992 ISDA Master Agreement was adopted at this time. No Master ISDA Agreement was executed at this time.

July 2010

A series of restructuring agreements are put in place by Glen and Millvalley. No Master ISDA Agreement was executed at this time.

October to November 2011

After a further round of restructuring discussions, the loans are restructured and at AIB's insistence, the new arrangement is conditional upon a Master Agreement in 2002 form schedule being adopted by the parties. A draft Master Agreement is circulated and agreed in the 2002 form schedule.

December 2012

By now IBRC had succeeded AIB and agreed a further restructuring of the facilities ("the Restructured Swap Confirmation") whereby Millvalley agreed to enter into terms as to duration and term as per the Original Swap but for a reduced sum of £27.7 million. This involved what IBRC referred to as a partial tear up of the original 2006 swap. 

IBRC then made a clerical error by issuing a long form document which wrongly cross referred to the standard form 1992 ISDA and not the Schedule to the Master Agreement in the 2002 Form.  No reference to the schedule which had been discussed and agreed was included.

June 2014

Glen sells one of the properties and repays one of the facilities agreed in 2010 early, thereby meaning there was no need for the hedge to continue. Wight submitted that this early repayment triggered an "Additional Termination Event" under Part 1(g)(i) of the Schedule to the ISDA Master Agreement.

July 2014

IBRC (by now in liquidation) subsequently sent a notice setting out the Early Termination Amount was owed. Millvalley responds by taking the point that the 2002 ISDA Master Agreement does not apply to the Restructured Swap Confirmation.

September 2014

The loan agreements were assigned to Wight, which subsequently claimed payment of the Early Termination Amount.


Relief Sought by Wight

Wight sought a declaration as to the meaning and effect of an interest rate swap confirmation, which had been agreed in December 2012 (referred to in the Judgment as "Restructured Swap Confirmation") and in the alternative sought rectification of the Restructured Swap Confirmation.

Millvalley argued that the 2002 Form terms had not been adopted, but that the 1992 Form had been adopted which precluded a claim for the Early Termination Amount and that a claim for rectification was barred.


The Judgment provides a forensic analysis of the progress of the various agreements adopted by the parties and their successor entities. It highlights the difficulties that arise when accommodating so many structural changes and then seeking to formalise them in revised documentation. The Judge also demonstrated in some detail the differing evidential approaches to considering the construction of a contractual arrangement and a claim for rectification. 

Evidence of intention will only be considered in claims for rectification. Here the Judge found the parties had made a common mistake. Ultimately the Court held that the 2002 ISDA Master Agreement had not been incorporated as a matter of construction of the contractual documents, but held that the Restructured Swap Confirmation Agreement should be rectified to include the 2002 ISDA Master Agreement and schedule.

The Court further held that there was no bar to a claim for rectification.


Rectification is often regarded as the last refuge of the truly desperate litigant, but here the Court was content to offer the relief, as on a proper construction of the agreement, the Court found that the parties had incorporated the ISDA 1992 Long Form by mistake in to the terms, which were agreed which the Court held did not accord with the express intentions of the parties.

The case underlines the need for parties to carefully document and check any changes to a restructuring confirmation when considering interest swap agreements, and to be very clear as to their intentions as to what events will trigger termination for early repayment. Using the appropriate Master Agreement or, if necessary, long form precedent is essential. 

It also shows that defendants need to be careful of the costs risks arising from ISDA Agreements, which includes a costs indemnity provision. In this matter indemnity costs were awarded in favour of Wight.


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