Greenclose v National Westminster Bank plc: Difference between revisions

Greenclose v National Westminster Bank plc (view source)

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 as case opining on the meaning of the apparently harmless {{isdaprov|Notices}} Section (Section {{isdaprov|12}}) of the {{1992ma}}, and in particular what is an [[electronic messaging system]] and more to the point what it is not - in the opinion of learned Justice Andrews, and includes [[email]].
-Mister Greenclose, one of those fabled little old ladies of the law, was in fact a sophisticated and successful owner of family business running small luxury hotels. he entered an extendable collar transaction under a 1992 {{isdama}} - the edition is important - which would expire on 30 December unless NatWest gave proper notice of its extension before that time.
+Mister Leach, of Greenclose, was one of those fabled little old ladies of the law. He was also, so the court found, a sophisticated and successful owner of family business running small luxury hotels in Wales. But he was the wrong end of lending tactic that NatWest and other lenders imposed on midsized corporates in the mid 2000s, which was to lend them some money and then compel them to inter a derivative to hedge interest-rate risk. In Greenclose's case, he was obliged to buy a rate collar for five years, and to grant the bank an option to extend it for seven years.
+The notional point of the hedge was to protect Greenclose against interest rate spikes over the ten year term of the loan: interest rates being an uncommonly low 4.5% in 2006, and generally expected, in those good old days, to shortly rise. To make the cost of the option more attractive to Greenclose, NatWest suggested they limit the downside risk also, and make it a collar - thus limiting Greenclose's exposure to interest rates between  5.07% and 6%.
+Greenclose therefore borrowed at that handsome rate but also entered an extendable collar transaction under a 1992 {{isdama}} - the edition is important - which would expire on 30 December 2012 unless NatWest gave proper notice of its extension before that time.
+If interest rates were low in 2006, they were even lower in 2012, such that the collar trade was massively out of the money. RBS of course wanted to exercise the option, notwithstanding that there was no real risk
 Schoolboy error no.1 by NatWest was to provide for a notice deadline to expires when the recipient is highly likelihood to be out of the office. But that's as may be.
 Error no. 2 - less of a schoolboy one, in this reviewer's opinion, was to assume that an email - being, after all, an '''electronic''' mail sent over a computer '''system''' (so sayeth [https://en.wikipedia.org/wiki/Email Wikipedia]) fell within the meaning of an "electronic messaging system".