LEHMAN BROTHERS SPECIAL FINANCING INC V CARLTON COMMUNICATIONS

[2011] EWHC 718 (Ch), Chancery Division, Mr Justice Briggs, 28 March 2011

Banking - Interest rate swaps - Construction of agreements - Anti-deprivation principle - Rule against penalties

The claimant sought recovery of £2,656,649 plus interest alleged to have been owing by the defendant upon the maturity on 2 March 2009 of two linked interest rate swaps incorporating the terms of the 1992 ISDA Multicurrency Cross Border Master Agreement. The defendant claimed declarations that the Master Agreement was in part unenforceable because it offended the anti-deprivation principle (which prevents a transfer of property on insolvency in contravention of the principle that unsecured creditors are to be treated equally) or, alternatively, constituted a penalty. The court ruled as follows.