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14 Apr 2020

Notice Clauses in Finance Contracts: Alfred Street v NAMA & Ors


In a recent decision1, the Commercial Court has provided guidance on the interpretation of the ISDA Master Agreement and 2000 Definitions. While emphasising the need to interpret standard documentation strictly so as to provide certainty, the Court made it clear that spurious claims based upon “unreasonable” and “overly pedantic” points will not be entertained.


The Claimant, Alfred Street Properties Limited (“ASPL”), is a Northern Irish commercial property developer.  The Defendant, the National Asset Management Agency (“NAMA”), is the statutory corporation created by the Irish Government in response to the 2008 global financial crisis, which. acquired loans and financial instruments from various financial institutions, including Anglo Irish Banking Corporation (“Anglo”). 

ASPL had entered into numerous banking facilities with various commercial lenders, including Anglo. By facility letter dated 4 August 2007, Anglo agreed (amongst other things) to extend its facilities of around £111.5 million to ASPL, thereby consolidating and replacing the earlier facilities. The new facilities were available to ASPL on an interest only basis until 30 September 2011, and thereafter repayable on demand.  ASPL covenanted that a minimum of 50% of the facilities would be hedged at all times to the satisfaction of Anglo. 

As agreed, on 4 March 2008 ASPL and Anglo entered into five extendable interest rate swaps (the “Swaps”), with options to extend the Swaps for a further three years (the “Options”).  Anglo was the floating rate payer and ASPL was the fixed rate payer, the fixed rate being 4.5% until 1 April 2012 and 4.75% until 2 April 2012. The Swaps were evidenced by five identically-worded confirmations from Anglo to ASPL, sent to ASPL’s postal address (the “Confirmations”). The Confirmations expressly incorporated the 2000 ISDA Definitions, and were governed by the 1992 ISDA Master Agreement (Multicurrency-Cross Border). The Confirmations also set out the terms which would result from the exercise by Anglo of its right to extend, i.e. a further swap from 2 April 2012 to 1 April 2015 on the same terms as the original Swap, save that the fixed rate to be paid by ASPL was increased to 5.42%.

On 13 December 2010, NAMA became the beneficial owner of Anglo’s rights under the Swaps (Anglo retaining the legal ownership) and on 22 December 2011 NAMA notified ASPL that it had acquired ASPL’s indebtedness.

On 2 April 2012, NAMA, by its agent, notified Mr Lamont of ASPL by telephone at about 9.15 am that the extension right had been exercised.  This call was recorded and transcribed by NAMA, with a timestamp of the call.  At 3.01 pm the agent under the facility sent an email to Mr Lamont attaching five separate notices giving notice that on 2 April 2012 “the Transaction was exercised” and attaching a copy of the relevant Swap.  ASPL subsequently made all the quarterly payments (at the increased fixed rate) in accordance with the extended terms of the Swap.  Despite this, and a year after the terms of the extended Swaps had expired, on 23 June 2016, ASPL claimed that the exercise of the options by NAMA had been invalid and sought repayment of the £4.78 million paid by it thereunder, plus interest.  

The claim

ASPL claimed that notification of the exercise of the Options by telephone was invalid.  Although the ISDA Definitions allowed notification by telephone under s.12.2, ASPL claimed that s.12.2 was not engaged because the Confirmations did not expressly identify (using capitalised terms) that the transactions were “Option Transactions” or “Swaptions”.  Further, ASPL alleged that NAMA’s agent did not in fact exercise the Options on the telephone call, but simply indicated NAMA’s intention to exercise the Options.

The claim focussed on contractual interpretation and whether or not NAMA was entitled to exercise the routes specified in the 2000 Definitions, which included exercise by telephone.  Lord Justice Phillips determined that NAMA was entitled to exercise the Options by telephone, had validly done so, and rejected ASPL’s claim for, amongst others, the following noteworthy reasons:

  • 1A failure to use the capitalised term definitions did not invalidate the notification by telephone under s.12.2. Whilst ISDA documents should be construed strictly in order to provide certainty for the parties, where necessary they should be interpreted under the general rules of contractual interpretation. On the Court’s analysis, the ISDA Definitions only required the transaction to be clearly identified as an option transaction or swaption, they did not require the use of precise capitalised terms.
  • 2Further, even if the Court were wrong in its analysis, the s.12.2 procedure had been incorporated into the Confirmations because, amongst other things, the Options and their terms were structured by reference to terms defined in s.12 of the ISDA Definitions.
  • 3The claim by ASPL that the telephone conversation with NAMA’s agent was only a notice of intention to exercise, rather than an actual exercise of the Options, was rejected.The test to be applied was an objective one and the words actually used (as recorded) on the telephone call, together with the factual and commercial context of the need to exercise the Options within a specific time limit, led to the Court’s clear conclusion that the Options had been exercised on the telephone call.
  • 4The Court concluded that even if it was wrong in its analysis, NAMA would, in any event be able to rely on the defences of estoppel by convention or by conduct, or change of position given the parties’ conduct since the allegedly defective exercise of the Options.The Judge noted that ASPL’s contention that the notices were defective was “remarkably opportunistic and unattractive” given that ASPL had had the benefit of the protection of the extended Swaps and the fulfilment of its contractual requirement to hedge 50% of its borrowing from NAMA: “the belated assertion of invalidity was a classic case of a party claiming to have the benefit of a one-way bet, seeking the return of its stake when the bet was lost”. This was a “clear case where the doctrine of estoppel by convention applies with full force….” and “it was plainly unconscionable for ASPL to assert the invalidity of the extensions of the Swaps after June 2014”.


The Judge criticised ASPL’s claims as “highly opportunistic and meritless [….] to make it worse, the technical point was itself based on an overly-pedantic and unreasonable interpretation of commercial confirmations of the relevant contracts.”  He concluded that the “claim should not have been brought, [and] was pursued unreasonably”.

In uncertain economic climes, this case serves as a useful reminder to parties of the importance of ensuring that notice clauses under ISDA documentation and other contracts are properly and carefully drafted and closely complied with.  If there are shortcomings in the notice, though, the receiving party should raise any objections with the serving party promptly; the Courts may well not entertain claims of this nature at a later date.   

The decision is also a reminder that, whilst standard documents such as an ISDA Master Agreement will be interpreted strictly so as to promote certainty, the Courts will not find attractive overly “pedantic” constructions which are inconsistent with what was, objectively speaking, the commercial bargain reached by the parties.


1 Alfred Street Properties Limited (formerly known as Killultagh Estates Limited) v National Asset Management Agency [2020] EWHC 397