Key point

This case demonstrates how reservation of legal rights can be key even if the parties are seeking a commercial solution


KSF's administrators issued proceedings against UBS amongst other things for payment of US$65 million which should have been paid by UBS to KSF under an ISDA Master Agreement between UBS and KSF.  The sum had mistakenly been paid by UBS to KSF's parent company ("KHF") in October 2008.  KSF attempted to resolve the matter by engaging in discussion with KHF.  Neither contacted UBS.  JP Morgan, the receiving bank, contacted UBS to say that KHF had been unable to apply the funds, at which point UBS realised its mistake and informed JP Morgan that the funds were intended for KSF. 

KHF agreed that its account should be debited. In fact, the debit was never made because the Icelandic financial supervisory authority took control of KHF. JP Morgan was instructed to put all transactions on hold.  UBS believed that the matter had been closed and terminated the ISDA Master Agreement.  Only in August 2012 did KSF claim payment of the US$65 million from UBS.


UBS had established estoppel by convention because it had shown that its understanding was that (i) its payment obligation had been discharged, (ii) KSF had also operated on that understanding, or at least, had not indicated otherwise and (iii) it would be unjust to allow KSF to assert a claim to the contrary (as UBS had lost its ability to retrieve the funds from KHF due to the insolvency).  KSF was therefore unable to recover US$65 million from UBS. 


Whilst it can be attractive to seek commercial solutions to problems reserving your rights against them in case the commercial solution falls through is essential to avoid an estoppel arising preventing the claim from being pursued. 

Kaupthing Singer & Friedlander Ltd (in administration) v UBS AG [2014] EWHC 2450 (Comm)