In LSREF III Wight Limited v Millvalley Limited [2016] EWHC 466 (Comm), Mr Justice Cooke, sitting in the Commercial Court, considered a restructured interest rate swap agreement referring to the International Swaps & Derivatives Association (ISDA)'s 1992 Master Agreement. He declined to make a declaration that, on its true construction, it incorporated the 2002 Master Agreement, but ordered rectification to achieve a similar outcome.


LSREF purchased a restructured interest swap agreement from the bank which had originally supplied the loan facility to its customer, Millvalley.

During the intervening period there had been a restructuring of the facility. Unfortunately, when the bank and Millvalley had executed the subsequent agreement, which had taken the form of the 2002 ISDA Master Agreement, neither had noticed that it referred to the 1992 version. The key difference only came to light when LSREF sought to rely on early termination provisions, which were missing from the 1992 version. When Millvalley refused to pay LSREF, LSREF brought proceedings seeking declaratory relief.


The court needed to determine whether:

(1) the restructured swap agreement was governed by the 1992 or 2002 ISDA Master Agreement;

(2) the restructured swap agreement should be rectified, so as to be subject to the 2002 ISDA Master Agreement;

(3) entire agreement clauses in the 2002 ISDA Master Agreement and the restructured swap agreement prevented rectification;

(4) s7 of the 2002 ISDA Master Agreement prevented the bank's assignment to LSREF of the s11 costs indemnity.


(1) Construction Issue

As a matter of construction, the court found the parties' objectively expressed intention had not been for the restructured swap agreement to be governed by the 2002 ISDA Master Agreement. There was nothing so wrong with the language that there was a clear mistake requiring correction. The agreement was not ambiguous, nor was its nonsensical.

(2) Rectification Issue

The court found from the evidence that when they executed the restructured swap agreement, the bank and Millvalley had intended it should be governed by the 2002 ISDA Master Agreement. Any objective observer would have come to that conclusion, so the court ordered rectification accordingly.

(3) Entire Agreement Issue
Although the entire agreement clause was relevant to the rectification issue, the court doubted such a clause could preclude rectification in a deserving case. In this particular instance the wording had been incapable of precluding rectification anyway.

(4) Costs Indemnity Issue

The court found that s11 of the 2002 ISDA Master Agreement meant the bank had been entitled to assign all of its interest in any early termination amount, including "any other rights" associated with that interest, such as the costs indemnity.


When a written agreement contains wording which is incorrect, the court can interpret the meaning by applying so-called rules of construction, but it is good practice to seek rectification as an alternative remedy.

Every case turns on its specific facts, but we do seem to have heard more about rectification in recent case law, perhaps underlining that it pays to adopt a broad approach in such cases, if not indicating a trend in judicial thinking.

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