New Judgment: Morgan Stanley & Co International Plc v Tael One Partners Ltd  UKSC 12
11 Wednesday Mar 2015
On appeal from:  EWCA Civ 473
The Supreme Court unanimously dismissed the appeal involving the contractual interpretation of the conditions forming part of a Loan Market Association standard terms for par trade transactions. The appellant argued that under the Loan Market Association terms it was entitled to the portion of the Payment Premium that accrued in relation to the respondent’s participation by reference to the period before the loan settlement date. It applied for a summary judgment against the respondent which Popplewell J granted. The Court of Appeal allowed an appeal of that the decision, which the appellant now challenged.
Lord Reed stated on behalf of all the justices that the starting point for the contractual interpretation is the words the parties used in condition 11.9(a). There is room for argument as to whether the payment premium would be “interest or fees” or whether it might fall within the definition of PIK interest. It is clear, however, that it is not “expressed to accrue by reference to the lapse of time”. He stated that the LMA terms do not make provision for any mechanism enabling the holder of the putative right to a payment premium to know when his right has vested or in what amount. It would be more natural to expect the potential value of the right to receive the premium to be reflected in the consideration for which the loan was transferred.
Upon examination, condition 11.9(a) did not provide a right to payment but rather allocates interests and fees as being “for the account for” one party and an obligation to “pay” in accordance with that account.