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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Barclays Bank Plc v Unicredit Bank AG & Anor [2012] EWHC 3655 (Comm) (21 December 2012) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2012/3655.html Cite as: [2013] Bus LR D78, [2012] EWHC 3655 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Buildings, Fetter Lane, EC4A 1NL |
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B e f o r e :
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BARCLAYS BANK PLC |
Claimant |
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- and - |
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(1) UNICREDIT BANK AG (formerly known as BAYERISCHE HYPO-UND VEREINSBANK AG) (2) UNICREDIT BANK AUSTRIA AG |
Defendants |
____________________
David Wolfson QC and Edmund King (instructed by Quinn Emanuel Urquhart & Sullivan LLP) for the Defendants
Hearing dates: 27, 28, 29 November 2012 and 3 & 6 December 2012
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Crown Copyright ©
The Hon. Mr Justice Popplewell :
Introduction
(1) a guarantee dated 29 September 2008 between Barclays and HVB as amended and restated on 2 April 2009 ("the HVB-1 Guarantee");
(2) a guarantee dated 19 December 2008 between Barclays and Bank Austria as amended and restated on 2 April 2009 ("the BA Guarantee");
(3) a guarantee dated 22 December 2008 between Barclays and HVB as amended and restated on 2 April 2009 ("the HVB-2 Guarantee").
The regulatory context and the background to the Guarantees
The Guarantees
(1) Barclays agreed to accept risk on the "super senior" tranche of the portfolios for the first six quarters of the lifetime of the Guarantees. This tranche was 70% to 100% of losses on the portfolio. This risk would only therefore eventuate if there were credit defaults in the first year and a half giving rise to losses in excess of 70% of the notional portfolio value. This was regarded on both sides as a very remote risk, but it was a genuine risk transfer which was not subject to any adjustment if it eventuated. To this very limited extent Barclays was exposed to the credit risk of the performance of the Reference Portfolio.
(2) Barclays was also potentially exposed to a timing risk depending on when the first tranche losses occurred. The premiums over the life of the Guarantees were designed to exceed the total exposure on the first tranche by a margin which would safely cover the interest cost to Barclays of having a negative Accumulation Ledger from time to time. However it was possible, although unlikely, that interest rates would increase during the lifetime of the Guarantee to a sufficient level to exceed this margin and expose Barclays to a potential interest rate loss. In the case of the HVB-1 Guarantee, which only provided for distribution of surplus at the end, this risk would only eventuate if there were a combination of heavy losses early in the lifetime of the Guarantee and an unexpectedly large increase in interest rates. In the other two Guarantees, in which Barclays would not retain the same interest benefit of the Ledger being positive (because surplus was distributed annually during the lifetime of the Guarantee) the risk profile was more complex. This risk was recognised during negotiations and referred to at times as "the extension risk".
Optional Early Termination
(1) the "Weighted Average Life Termination Date" (Clause 12.1(d));
(2) a "Regulatory Change" (Clause 12.1(b));
(3) the "Substitution Event Date" (Clause 12.1(a)); and
(4) a "10% Clean-up Call Event" (Clause 12.1(c)).
"If: ..(b) a Regulatory Change occurs in respect of [UniCredit], provided that [UniCredit] has obtained the prior consent from [Barclays], such consent to be determined by [Barclays] in a commercially reasonable manner .. [UniCredit] may, by not less than 5 Business Days notice to [Barclays], designate the next following Payment Date as an Optional Early Termination Date."
29.
30.
31. Regulatory Change was defined in Clause 1.1 to occur when:
"in the determination of [UniCredit] [UniCredit] will be subject to less favourable regulatory capital treatment with respect to this Guarantee, [the portfolio obligations] and/or the amount of regulatory capital freed up in respect of [the portfolio obligations] ."
(1) The Substitution Event Date was the quarter day four years after the date of the Guarantee. At that point UniCredit was entitled to bring the Guarantee to an end if it wished to enter into a substitute transaction in order to resecuritise the remaining portfolio. It could only do so if the Accumulation Ledger were positive; and such termination required UniCredit to pay a "Substitution Premium", which amounted to one year's Barclays' fees for the Guarantee.
(2) A "10% Clean-up Call Event" occurred if the Reference Portfolio had fallen to 10% or less of its original notional value. As with termination following a Regulatory Change, UniCredit was entitled to terminate the Guarantees early on this ground only with the consent of Barclays, such consent to be determined in a commercially reasonable manner.
(3) The Rating Event Substitution Date was only to be found in the BA Guarantee. If Barclays' credit rating were downgraded, UniCredit could terminate early, again provided that the Accumulation Ledger were positive. If it wished to do so it was obliged to pay the "Rating Event Substitution Premium", which was defined in such terms as to ensure that Barclays would receive from Bank Austria the balance of five years' fees.
(1) the Weighted Average Life Termination Date could occur only after five years;
(2) the Substitution Event Date occurred after four years but required payment of one year's fees as a condition of termination;
(3) a Rating Event Substitution Date could occur at any time, but the premium to be paid on termination was the balance of five years' fees.
"the amount determined by [Barclays] to be its costs in connection with the early termination of the Guarantee, as determined by [Barclays] in good faith and a commercially reasonable manner by reference to its books and records and including, without limitation, any costs associated with loss of profit or unwinding any hedges associated with this Guarantee".
"20.1 This Guarantee, together with the Credit Support Agreement, constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto."
Request for Early Termination
"Although early termination of the Agreement was contemplated in the Agreement, it is clear that the parties intended the Agreement to continue for a substantial period of time. Unicredit cannot reasonably expect Barclays to consent to termination so early in the term of the Agreement, in circumstances where this would deprive Barclays of a significant proportion of the overall revenue that it had bargained for and thus result in material economic detriment to Barclays."
"Clause 12.1(b) clearly contemplates the possibility that consent may not be given to a proposed early termination. As outlined in our 23 June letter, the decision in the present case has been made by Barclays in a commercially reasonable manner, taking into account particularly the fact that an early termination at such an early stage in the scheduled life of the Agreement would deprive Barclays of a significant proportion of the overall revenue that it had bargained for and thus result in material economic detriment to Barclays."
The submissions
(1) The discretion conferred on Barclays by clause 12.1(b) of the Guarantees, to determine whether to grant its consent in a commercially reasonable manner, was subject to a requirement of rationality equivalent to the implied obligation of reasonableness attached to any discretion conferred on one party to a contract, as more particularly articulated by Rix LJ in Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd [2008] Bus LR 1306 at [61]-[66];
(2) There was a common understanding reached between the parties during the negotiations for the HVB-1 Guarantee, which remained the common understanding for the BA and HVB-2 Guarantees, that:
(a) Barclays would be paid its fee for a minimum of five years regardless of any Regulatory Change; and
(b) Barclays would be entitled to decline its consent to early termination in the event of a Regulatory Change if Barclays did not receive its fees for five years; and
(c) a determination by Barclays to refuse consent to early termination for a Regulatory change without being paid five years' fees would be a determination in a commercially reasonable manner.
(3) Alternatively, such an understanding on Barclays' part was communicated to UniCredit and acquiesced in by UniCredit in the negotiations.
(4) Reliance on such an understanding is not precluded by the EAU Clause.
(5) Such understanding is determinative of whether Barclays was entitled to withhold its consent because:
(a) it was commercially reasonable for Barclays to exercise its discretion in accordance with the understanding as to how it would do so; and/or
(b) the understanding gives rise to an estoppel by convention or acquiescence.
(6) Alternatively, absent any such understanding on which Barclays is entitled to rely, the determination to refuse consent was reasonable in that:
(a) it was commercially reasonable to refuse consent unless paid the balance of five years' fees, discounted to present value; and/or
(b) it was commercially reasonable to refuse consent in circumstances where UniCredit did not offer to pay any sum in return, not even Barclays' hedge unwind costs.
(7) Accordingly Barclays is entitled to a declaration to that effect, and that the Guarantees have not been validly terminated.
(8) Alternatively, if Barclays did not determine its refusal of consent in a commercially reasonable manner, it nevertheless refused consent, the Guarantees remain in force and UniCredit's remedy lies in damages.
(1) The discretion conferred on Barclays by clause 12.1(b) of the Guarantees imported an objective standard of reasonableness.
(2) The EAU Clause precluded Barclays from relying on, and the Court from investigating, any shared understanding or acquiesced in understanding; it similarly precluded investigation of, or reliance on, Barclays' understanding of UniCredit's understanding.
(3) There was in fact no shared or acquiesced in understanding of the nature alleged by Barclays, and no estoppel.
(4) In the absence of Barclays' ability to establish or rely upon the alleged shared or acquiesced in understanding, Barclays' determination was not commercially reasonable. Barclays was insisting on five years' fees, which was unreasonable. Although UniCredit did not offer any payment in return for consent, it was for Barclays to identify and ask for the price for their consent if a commercially reasonable determination justified one.
(5) If the determination to refuse consent was not commercially reasonable, the effect was to waive consent, with the result that the early termination option was validly exercised.
(6) Alternatively, if Barclays refusal of consent was determined in a commercially reasonable manner, Barclays is confined to a remedy in damages because Barclays was bound to accept UniCredit's repudiatory breach under the principle in White & Carter (Councils) Ltd v McGregor [1962] AC 413.
(1) What is meant by "commercially reasonable" in Clause 12.1(b)? Does it import a Socimer standard of rationality or an objective standard of reasonableness, and what criteria are to be applied?
(2) Ignoring any shared or acquiesced in understanding, was Barclays' refusal of consent commercially reasonable:
(a) because UniCredit offered no payment of any kind in return; and/or
(b) because it was commercially reasonable for Barclays to refuse consent unless or until it had received five years' fees?
(3) Does the EAU Clause preclude Barclays from relying on a shared or acquiesced in understanding, or estoppel, of the kind which it alleges?
(4) If not, was there in fact such a shared or acquiesced in understanding, and/or is there an estoppel by convention or acquiescence?
(5) What are the consequences of the conclusions reached in (1) to (4) above?
Issue 1: What is meant by "commercially unreasonable" in Clause 12.1(b)?
" 60 When a contract allocates only to one party a power to make decisions under the contract which may have an effect on both parties, at least two questions arise. One is, what if any are the limitations on the decision-maker's freedom of decision? .
61 The answer to the first question is illustrated by cases such as the following. In Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The Product Star) (No 2) [1993] I Lloyd's Rep 397 the charterparty contained a clause which gave charterers the right to alter the destination of the cargo in circumstances where the contractual port of loading or discharge was blockaded owing to war and "the loading or discharging of cargo at any such port be considered by the Master or the owner in his or their discretion dangerous". The trial judge, upheld by the Court of Appeal, held that the owners' purported decision under this clause was wholly unwarranted, and that in fact they did not consider it dangerous to proceed to the contractual loading port. Leggatt LJ, with whom Balcombe and Mann LJJ agreed, said about the content of the owners' power, at p 404:
"For purposes of judicial review the court is concerned to judge whether a decision-making body has exceeded its powers, and in this context whether a particular decision is so perverse that no reasonable body, properly directing itself as to the applicable law, could have reached such a decision. But the exercise of judicial control of administrative action is an analogy which must be applied with caution to the assessment of whether a contractual discretion has been properly exercised. The essential question always is whether the relevant power has been abused. Where A and B contract with one another to confer a discretion on A, that does not render B subject to A's uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it must be conferred, it must not be exercised arbitrarily, capriciously, or unreasonably. That entails a proper consideration of the matter after making any necessary inquiries. To these principles, little is added by the concept of fairness: it does no more than describe the result achieved by their application."
62 Ludgate Insurance Co Ltd v Citibank NA [1998] Lloyd's Rep IR 221 concerned an agreement by which the London Market Letter of Credit Scheme was operated by Citibank. In certain circumstances the agreement gave to the bank the rights "to retain in the account(s) such additional margin as it considers appropriate in all the circumstances" and to "allocate the drawing(s) . . . in such manner as the bank considers appropriate in its sole discretion": p 221. Waller J and this court held that Citibank had exercised its decision-making rights in accordance with the purposes for which they were granted. Brooke LJ, with whom Mummery and Russell LJJ agreed, said, at paras 35-36:
35. It is very well established that the circumstances in which a court will interfere with the exercise by a party to a contract of a contractual discretion given to it by another party are extremely limited. We were referred to Weinberger v Inglis [1919] AC 6o6; Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896; Docker v Hyams [1969] 1 Lloyd's Rep 487 and Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd (The Product Star) (No 2) [1993] 1 Lloyd's Rep 397. These cases show that provided that the discretion is exercised honestly and in good faith for the purposes for which it was conferred, and provided also that it was a true exercise of discretion in the sense that it was not capricious or arbitrary or so outrageous in its defiance of reason that it can properly be categorised as perverse, the courts will not intervene.
"36. Mr Rowland sought to derive comfort from some of the language used by Leggatt LJ, with whom the other members of this court agreed, in The Product Star (No 2) at p 404 in support of a contention that the courts are more ready to apply a standard of objective reasonableness when assessing whether a discretionary decision can stand. That Leggatt LJ had not the slightest intention of watering down the well-established test is manifest from the passages of his judgment (at pp 405 RHC, 406 RHC and 407 RHC) in which he applied the law to the facts, where it is clear that he is using the epithet 'unreasonable' to characterise a view which no reasonable decision-maker could reasonably have formed on the material before him."
63 Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [200I] 2 All ER (Comm) 299 concerned the claims co-operation clause in a facultative reinsurance policy. The clause required the prior approval of the reinsurers for any settlement or compromise of an underlying loss. The issue was raised whether it was to be implied that reinsurers could not withhold such approval unless they had reasonable grounds for doing so. This court, in a judgment given by Mance LJ (in which Latham LJ and Sir Christopher Staughton shared), held that no such implication was to be made. Mance LJ said, at paras 64, 67 and 73:
"64. I gain some assistance by analogy from these cases. In all of them, it seems to me that what was proscribed was unreasonableness in the sense of conduct or a decision to which no reasonable person having the relevant discretion could have subscribed . ."
"67 . . . I would therefore accept as a general qualification, that any withholding of approval by reinsurers should take place in good faith after consideration of and on the basis of the facts giving rise to the particular claim and not with reference to considerations wholly extraneous to the subject matter of the particular reinsurance."
"73. If there is any further implication, it is along the lines that the reinsurer will not withhold approval arbitrarily, or (to use what I see as no more than an expanded expression of the same concept) will not do so in circumstances so extreme that no reasonable company in its position could possibly withhold approval. This will not ordinarily add materially to the requirement that the reinsurer should form a genuine view as to the appropriateness of settlement or compromise without taking into account considerations extraneous to the subject matter of the reinsurance."
64 Paragon Finance plc v Nash [2002] I WLR 685 concerned a variable interest clause in a mortgage agreement. The issue was whether the discretion given to the mortgagee to vary the interest rate was subject to an implied term that it was bound to exercise the discretion "fairly as between both parties to the contract, and not arbitrarily, capriciously or unreasonably". Dyson LJ, with whom Thorpe LJ and Astill J agreed, accepted a limited implication in which "unreasonably" was understood in a sense analogous to the Wednesbury sense. That was the sense in which Leggatt LJ had used the expression in The Product Star (No 2): see paras 37-38. Dyson LJ concluded, at para 41:
"41. So here too,"referring to Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2)"we find a somewhat reluctant extension of the implied term to include unreasonableness that is analogous to Wednesbury. I entirely accept that the scope of an implied term will depend on the circumstances of the particular contract. But I find the analogy of the Gan Insurance case and the cases considered in the judgment of Mance LJ helpful. It is one thing to imply a term that a lender will not exercise his discretion in a way that no reasonable lender, acting reasonably, would do. It is unlikely that a lender who was acting in that way would not also be acting either dishonestly, for an improper purpose, capriciously or arbitrarily. It is quite another matter to imply a term that the lender would not impose unreasonable rates."
66 It is plain from these authorities that a decision-maker's discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for o instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time. In the latter class of case, the concept of reasonableness is intended to be entirely mutual and thus guided by objective criteria. Gloster J was therefore, in my judgment, right to put to Mr Millett in the passage cited at para 57 above the question whether a distinction should be made between the duty to take reasonable care and the duty not to be unreasonable in a Wednesbury sense; and Mr Millett was in my judgment wrong to submit that it made no difference which test was deployed. Laws LJ in the course of argument put the matter accurately, if I may respectfully agree, when he said that pursuant to the Wednesbury rationality test, the decision remains that of the decision-maker, whereas on entirely objective criteria of reasonableness the decision-maker becomes the court itself. A similar distinction was highlighted by Potter LJ in Horkulak [2005] ICR 402 para 51. For the sake of convenience and clarity I will therefore use the expression "rationality" instead of Wednesbury-type reasonableness, and confine "reasonableness" to the situation where the arbiter on entirely objective criteria is the court itself."
"(1) The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee ..
(2) As a corollary to the first proposition, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease ............
.
(4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances ...
..
(6) There is a divergence of authority on the question, in considering whether the landlord's refusal of consent is reasonable, whether it is permissible to have regard to the consequences to the tenant if consent to the proposed assignment is withheld .. in my judgment a proper reconciliation of those two streams of authority can be achieved by saying that while a landlord need usually only consider his own relevant interests, there may be cases where there is such a disproportion between the benefit to the landlord and the detriment to the tenant if the landlord withholds his consent to an assignment that it is unreasonable for the landlord to refuse consent.
(7) Subject to the propositions set out above, it is in each case a question of fact, depending upon all the circumstances, whether the landlord's consent to an assignment is being unreasonably withheld "
[4] the question whether the landlord's conduct was reasonable or unreasonable will be one of fact to be decided by the tribunal of fact. There are many reported cases ..These cases are of illustrative value. But in each the decision rested on the facts of the particular case, and care must be taken not to elevate a decision taken on the facts of a particular case into a principle of law. The correct approach was very clearly laid down by Lord Denning MR in Bickel v Duke of Westminster [1977] QB 517 at 524.
[5] ..the landlord's obligation is to show that his conduct was reasonable, not that it was right or justifiable. As Danckwerts LJ held in Pimms Ltd v Tallow Chandlers Co in the City of London [1964] 2 QB 547 at 564: "... it is not necessary for the landlords to prove that the conclusions which led them to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances ...'" .I would respectfully endorse the observation of Viscount Dunedin in Viscount Tredegar v Harwood [1929] AC 72 at 78, that one 'should read reasonableness in the general sense'. There are few expressions more routinely used by British lawyers than 'reasonable', and the expression should be given a broad, commonsense meaning in this context as in others."
"222. In support of the applicability of such cases to commercial agreements, the Claimants relied upon the case of British Gas Trading Limited v Eastern Electricity, The Times, 29 November 1996, which concerned a long-term gas supply contract which required the customer's consent to any assignment of the supplier's rights and obligations under the contract, such consent not to be unreasonably withheld. The question for the Court was whether it was reasonable for the customer to withhold its consent, in circumstances where the supplier was undergoing a reorganisation (following a report by the Monopolies and Mergers Commission Report) and the resulting change in control would entitle the customer to terminate the contract in any event, unless the contract was first assigned. At first instance, Colman J made extensive reference to the landlord and tenant authorities and concluded that, in the circumstances of that case, consent to the assignment was being unreasonably withheld. That decision was upheld on appeal: [1996] EWCA Civ 1239.
223. The Claimants submitted that of particular importance in this case are the following principles, to be derived from the above authorities:
i) First, the burden is upon 3M to show that the Claimants' refusal to consent to the cessation of the Acolyte business was unreasonable.
ii) Second, it is not for the Claimants to show that their refusal of consent was right or justified, simply that it was reasonable in the circumstances.
iii) Third, in determining what is reasonable, the Claimants were entitled to have regard to their own interests in earning as large an Earn Out Payment as possible.
iv) Fourth, the Claimants were not required to balance their own interests with those of 3M, or to have any regard to the costs that 3M might be incurring in connection with the ongoing business of Acolyte.
228. 3M disputed the applicability of principles derived from landlord and tenant cases to a commercial agreement such as the SPA. However I accept, as Colman J did in the British Gas Trading Limited v Eastern Electricity case, that they provide some assistance and that the approach set out in paragraph 223 is appropriate in this case."
(1) The discretion is a broad one without any express limitation as to purpose (as distinct from the requirement that the manner of the exercise of the discretion be "commercially reasonable"). Such breadth is consistent with Barclays being permitted to exercise its discretion to protect its own commercial interests.
(2) UniCredit's case characterises the Guarantees as giving it a right to terminate the Guarantees, which constituted the primary interest and which would be negated by the refusal of consent. That characterisation misconstrues the relevant contractual term, which did not give UniCredit a right to terminate the Guarantees and provides no basis for asserting the primacy of UniCredit's interest in termination following a Regulatory Change. On the contrary, the ability to terminate was expressly subject to the requirement for Barclays to give its consent. That requirement for Barclays' consent gave priority to the ability of Barclays to exercise its discretion to protect its own commercial interests over the ability of UniCredit to terminate the Guarantees. Accordingly, Barclays could not negate a right to early termination by its refusal of consent there was no such right. The structure of the clause gives primacy to Barclays' right to refuse consent over UniCredit's right to early termination.
(3) The discretion given to Barclays by clause 12.1(b) would fall to be exercised only in the context of UniCredit wanting to terminate the Guarantees following a Regulatory Change which reduces or eliminates UniCredit's ability to obtain Regulatory Capital Relief from the Guarantees. In such a context, UniCredit's interest is bound to be that the Guarantees terminate; otherwise UniCredit would not be seeking Barclays' consent to do so. In that context, the objective purpose of conferring on Barclays a discretion to refuse consent must have been to permit Barclays to assert its own contrary interest in keeping the Guarantees in effect and continuing to receive payments under them in. Of necessity, the conferring of a discretion to refuse consent gives primacy to Barclays' interests over those of UniCredit.
(4) The definition of Regulatory Change is a wide one. It allows for the option to be triggered if the effect is less favourable regulatory capital treatment. This may remove only some part, perhaps a small part, of the benefit to UniCredit of the Guarantees. The definition grants to UniCredit the right to determine whether the change has this effect. The impact of any regulatory change on the regulatory capital position of Bank Austria, HVB, and the UniCredit group will be a matter peculiarly within the knowledge of UniCredit. UniCredit, not Barclays, will be in a position to discuss it with the local regulators. All this would make it unrealistic to construe the clause in a way in which Barclays was obliged to weigh up the detriment to UniCredit if consent were refused.
(1) Barclays' determination of whether to consent to early termination for a Regulatory Change under Clause 12.1(b) of the Guarantees must be commercially reasonable in an objective sense. It is not sufficient for Barclays to show merely that the decision was made in good faith and was not arbitrary, capricious or irrational.
(2) The question is not whether the decision is justified, but whether a reasonable commercial man in Barclays' position might have reached such a decision.
(3) In determining what is commercially reasonable, Barclays is entitled to take into account its own commercial interests. These take precedence over UniCredit's commercial interests in bringing to an end agreements which may no longer confer any financial advantage on UniCredit because it has lost the capital relief which the agreements were intended to confer. Barclays is not obliged to carry out a balancing exercise between its interests and UniCredit's interests.
(4) Barclays' commercial interests, in this context, comprise its interest in earning profits from its fee income under the Guarantees. Barclays would be entitled to refuse consent to protect that fee income unless its nature or amount was so disproportionate to UniCredit's obligation to continue to pay it that no commercially reasonable man in Barclays position could have reached such a decision. Unless the protection of fee income is of this character or reaches this level, Barclays is entitled to ignore the effect of the continuation of the Guarantees on UniCredit.
Issue 2(a): Ignoring any shared or acquiesced in understanding, was Barclays' refusal of consent commercially reasonable because UniCredit offered no payment of any kind in return?
Issue 2(b): Ignoring any shared or acquiesced in understanding, was it commercially reasonable for Barclays to refuse consent unless or until it had received five years' fees?
Issue 3: Does the EAU Clause preclude Barclays from relying on a shared or acquiesced in understanding, or estoppel, of the kind which it alleges?
" The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations, some (chance) remark or statement (often long-forgotten or difficult to recall or explain) upon which to found a claim, such as the present, to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search, and the peril to the contracting parties posed by the need in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that, accordingly, any promises or assurances made in the course of the negotiations (which in the absence of such a clause, might have effect as a collateral warranty) shall have no contractual force, save in so far as they are reflected and given effect in the document."
Issue 4: Was there a shared or acquiesced in understanding and/or is there an estoppel by convention or acquiescence?
Issue 5: Remedies and the White & Carter point
113. The general rule is that the repudiation of a contract does not necessarily bring the contract to an end. The innocent party has a right to choose either (i) to accept the repudiation, thus bringing the primary obligations in the contract to an end but leaving him with a right to enforce the secondary obligation to pay damages for the loss of the bargain; or (ii) to treat the contract as subsisting and claim any sums falling due under it as and when they fall due, together with any damages for the repudiating party's failure to perform as and when performance should have occurred. These principles had been applied for many years by the time that they were first articulated in Hochster v De la Tour (1853) 2 E & B 678 in England and Howie v Anderson (1848) 10 D 355 in Scotland, as the citations in the former case show. Their most recent and authoritative restatement is to be found in the speech of Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827. The concept was memorably expressed by Asquith LJ in Howard v Pickford Tool Co Ltd [1951] 1 KB 417, 421, when he described an unaccepted repudiation as "a thing writ in water."
Conclusion