High Court considers the meaning of “close of business”
Lehman Brothers International (Europe) (in administration) (“LBIE”) v Exxonmobil Financial Services BV (“Exxonmobil”) [2016] EWHC 2699 (Comm), 28 October 2016
The issue
One of the issues to be determined in this case was the meaning of “close of business” in relation to a “default valuation notice” sent by Exxonmobil to LBIE (“Notice”).
The standard form sale and repurchase agreement between the parties stated the following in relation to the deemed receipt of default valuation notices:
"any notice or communication which is received…after close of business… or on a day which is not a day on which commercial banks are open for business…shall be treated as given at the opening of business on the next following day..."
LBIE received the Notice by fax at 6.02pm on the relevant day. LBIE contended that close of business in London is 5pm. Exxonmobil contended that it is 7pm.
The outcome
Mr Justice Blair made the point that the term "close of business" on a particular day can be a useful term which provides a degree of flexibility to discourage arguments based on the precise time of receipt, which may make little commercial sense.
Where the intent of a contract is to impose a definite cut-off time, it can do so expressly. As the contract did not do this, the contract should not be interpreted as though it had. On these facts, Mr Justice Blair agreed with Exxonmobil’s expert, who explained that a necessarily rough approximation of the time of closure of a commercial bank in the modern day was about 7pm. Accordingly, he was satisfied that the notice was received by LBIE before close of business, and should therefore not be treated as being given at the opening of business on the following day.
This case is a useful reminder that if a party wishes to remove the inherent flexibility of such a provision, the contractual drafting should be sufficiently precise, with reference to the specific time.
This article was written by George Willis. For more information, please contact George on +44 (0)20 7427 6691 or george.willis@crsblaw.com.
