Importance of strict adherence to contractual notice provisions
29 May 2014
In Greenclose Ltd v National Westminster Bank plc  EWHC 1156 (Ch), 14 April 2014, the High Court found that the notice provisions in Section 12(a) of the 1992 ISDA Master Agreement are mandatory. Accordingly, a failure to follow them by sending notice by email (which was found not to be one of the permitted methods) rendered the notice ineffective. While this was a decision in relation to the 1992 ISDA Master, it serves as a reminder of the importance of following, to the letter, the notice provisions in any contract.
Greenclose was a family business which owned and operated three luxury hotels. The majority shareholder and managing director was Mr John Leach who was described by the court as "an astute and sophisticated businessman". In practice he was in overall charge of running the business with the assistance of, among others, the finance director Mr David Reynolds. Greenclose entered into a collar transaction with NatWest under the 1992 ISDA Master Agreement (the Collar). The Collar was for five years, which NatWest could extend by "giving notice to" Greenclose by 11am on 30 December.
Section 12(a) of the 1992 ISDA Master Agreement provides that notices "may be given in any manner set forth", namely in writing delivered in person, or by telex, fax, registered mail or "electronic messaging system", except for notices under Section 5 and Section 6 which "may not be given" by fax or "electronic messaging system".
The contact details in the Schedule, to which notices were to be sent, gave Greenclose's office address and telephone number and the contact as its finance director.
NatWest purported to give notice of extension by email to Mr Leach at 9.45am on 30 December. The email was followed by a voicemail on his mobile telephone at 9.59am. Mr Leach claimed he did not read the email, or listen to the message, until after 11am. Greenclose claimed that no valid notice had been given.
Mandatory or permissive
May … may not
User's Guides to the ISDA Master Agreements
"Electronic messaging system"
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