Disastrous currency swaps cost 4 million

Posted: 31st December 2014

FallA company which engaged in disastrous currency swaps with an investment bank is facing up to a bill for more than $4 million after the High Court ruled that it could not escape liability by reason of the bank’s delay in calculating the sum due.

The bank terminated the swap agreements after the company failed to meet margin calls. The latter did not dispute liability in principle and accepted that the bank had belatedly provided sufficient details of how the debt had been calculated. However, it argued that the delay of well over two years in providing those details amounted to a breach of the agreements and that it was too late for the bank to claim payment.

The Court accepted that it was arguable that the bank was in breach of contract due to its failure to provide its detailed calculations ‘as soon as reasonably practicable’ after the termination date. However, in entering summary judgment in the bank’s favour for the sum claimed, the Court found that an interpretation of the contract which resulted in the company escaping all liability by reason of the delay made no commercial sense and could not have been the parties’ intention.