A restructured swap agreement had mistakenly referred to the wrong version of the International Swaps and Derivatives Association master agreement, but the drafting had not gone so wrong that the court could correct it. However, the agreement would be rectified as the parties had had a continuing common intention about which version of the master agreement applied.

The claimant sought a declaration as to the construction of an interest rate swap agreement, or rectification.


The defendant had entered into an interest rate swap with a bank in connection with a loan facility. The swap was to be in the form of the International Swaps and Derivatives Association master agreement 1992. The loan facility was renegotiated and a restructured swap was agreed. The restructured swap confirmation referred to the ISDA master agreement 1992. The parties executed an agreement in the form of the ISDA master agreement 2002. The bank later claimed that the additional termination event provisions, which only appeared in the 2002 master agreement, had been triggered and that an early termination amount was due from the defendant. The defendant refused to pay on the basis that the 1992 master agreement applied to both swap agreements and therefore no early termination amount was due. The bank assigned its interest in the early termination amount to the claimant.




The issues were whether (1) the restructured swap was governed by the 1992 or 2002 ISDA master agreement; (2) the restructured swap agreement should be rectified so as to be subject to the 2002 master agreement; (3) entire agreement clauses in the 2002 master agreement and the restructured swap confirmation prevented rectification; (4) s.7 of the 2002 master agreement prevented the assignment to the claimant of the costs indemnity in s.11.


HELD: (1) The reference in the restructured swap to the 1992 master agreement had been a mistake, but as a matter of construction it could not be concluded that the parties’ objectively expressed intention had been for the restructured swap to be governed by the 2002 master agreement. It could not be said that something had gone so wrong with the language that there was a clear mistake that required correction, Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 A.C. 1101, Cramaso LLP v Viscount Reidhaven’s Trustees [2011] CSIH 81, 2012 S.C. 240, Arnold v Britton [2015] UKSC 36, [2015] A.C. 1619 and Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, [2011] 1 W.L.R. 770 applied. On the face of the documents, there was no ambiguity, no syntactical difficulty in construing the language used and the reference to the 1992 form could not be said to be such a commercial nonsense as to make it absurd for the parties to refer to it (see para.62 of judgment).


(2) There had been a continuing common intention when executing the restructured swap confirmation that it should be governed by the 2002 agreement, and not only was there clear outward expression of that accord, but it had also been the defendant’s subjective intention that that should be so, Daventry DC v Daventry and District Housing Ltd [2011] EWCA Civ 1153, [2012] 1 W.L.R. 1333 applied. Any hypothetical reasonable objective observer would conclude that that was the parties’ intention. The restructured swap would be rectified to refer to the 2002 master agreement (paras 74, 112, 115).


(3) An entire agreement clause might be relevant as a factor in determining issues of rectification, but could not in itself preclude it, JJ Huber (Investments) Ltd v Private DIY Co Ltd [1995] E.G. 112 (C.S.) , Procter and Gamble Co v Svenska Cellulosa Aktiebolaget SCA [2012] EWHC 498 (Ch) and DS-Rendite-Fonds Nr.106 VLCC Titan Glory GmbH & Co Tankschiff KG v Titan Maritime SA [2013] EWHC 3492 (Comm) considered. In any event, the wording of the two clauses could not preclude rectification in the instant case (paras 122-123).


(4) A party could transfer all of its interest in any early termination amount together with “any other rights” associated with that interest under s.11 of the 2002 agreement, which included the costs indemnity (para.131).


Judgment accordingly

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