When is a derivative a wagering contract? (WW Property Investments v National Westminster Bank)

When is a derivative a wagering contract? (WW Property Investments v National Westminster Bank)

A recent decision discusses whether or not certain derivatives should be categorised as wagering contracts.

Original news

WW Property Investments Ltd v National Westminster Bank plc

[2016] EWCA Civ 1142

The claimant, WW Property Investments, had contended that certain interest rate hedging contracts that it had entered into with National Westminster Bank constituted wagering contracts.

What was this case about?

This relates to an application by WW Property Investments (WW) to appeal a decision by HH Judge Roger Kaye QC dated 1 March 2016 (the Original Decision) where he struck out in its entirety their claim against National Westminster Bank (NatWest) and refused WW permission to add a new claim.

What were the facts?

Between 2004 and 2010, WW borrowed money from NatWest and also entered into four interest rate hedging contracts. Three of them were collars and the fourth was a swap entered into after the collars closed-out. The collars were entered into in order to hedge WW's interest obligations under the loan and it was a term of the loan that it should be hedged. The way the collars worked were that if interest rates rose above a certain level, NatWest would pay WW but if they fell below a certain level, WW would pay NatWest. Because interest rates dropped in 2008 and remained low, the collars were in NatWest's favour.

In 2013 NatWest carried out an interest rate hedging product review (IRHPR) which led to some redress being given to WW. In October 2014, NatWest made offers to WW in relation to the collars which were accepted by WW in January 2015. The offers meant that WW received over £424,152.06. In the offer letter that WW signed was wording that WW may also claim for additional losses. WW did make a claim for additional losses but this was ultimately rejected by NatWest.

Lord Justice Christopher Clarke in this

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About the author:

Meet Emma:

1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.Likes ballet, playing the harp and holidays

3.Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.