In this issue we look at an interesting case linked back to the Lehman administration, in which the court had to decide at what time "close of business" takes place for a commercial bank. We also look at the limits of legal advice privilege and proposed amendments to DTR and the stamp duty regime.


The High Court has held, in Lehman Brothers International (Europe) (in admin.) v ExxonMobil Financial Services BV [2016] EWHC 2699 (Comm), that "close of business" meant a time later than 5pm.


In early 2008, Lehman Brothers International (Europe) ("LBIE") entered into a repo transaction with ExxonMobil Financial Services BV ("ExxonMobil"). Under the contract, ExxonMobil would buy a portfolio of securities (principally equity, but with some debt) from LBIE on 9 September 2008, and LBIE would buy that portfolio back on 16 September 2008 (effectively with interest).

On 15 September 2008, the day before LBIE was to buy the portfolio back, Lehman Brothers collapsed and LBIE was placed into administration. It consequently became unable to repurchase the portfolio.

That same day, ExxonMobil served a notice of default on LBIE stating that the repurchase had become immediately due.

Various matters followed, but a key next step was that ExxonMobil was entitled to serve a default valuation notice. It would have to do this by close of business on the fifth dealing day after the event of default occurred. (In this case, the event of default occurred when LBIE went into administration.)

The repo contract did not define "close of business". However, it did state that, if a notice was received after close of business, or on a day on which commercial banks are not open for business, it would be regarded as received on the next business day.

ExxonMobil served its default valuation notice on LBIE by fax on 22 September 2008. The fax was received in full at LBIE's London offices at 6.02pm London time.

LBIE argued that "close of business" meant 5.00pm and so the notice was late. ExxonMobil said that "close of business" meant the typical close of business for commercial banks, which was 7.00pm.

If ExxonMobil was right, the value of the portfolio for the repurchase would be calculated based on the price at which ExxonMobil had managed to sell any of the portfolio securities itself, or on quotations for those securities, or on ExxonMobil's "reasonable opinion" of their fair market value.

If LBIE was right, the portfolio would be valued under a default valuation mechanism in the contract.


The court agreed with ExxonMobil. It found that, in the context of a repo financing between an oil major and an international investment bank, a reasonable person might be surprised to hear that business closes at 5.00pm, especially where the business does not in fact close at 5.00pm.

The judge also said that the repo contract could easily have imposed an express cut-off time, but it did not do so. By using the less precise term "close of business", the contract gave a "useful flexibility".

Practical implications

Although many people may (perhaps optimistically) regard close of business as 5.00pm or 5.30pm, this may not be the commercial reality. The courts will look at the nature of the contract and the parties' businesses to work out when close of business actually takes place. This is perhaps not surprising and essentially reflects the courts' existing approach to interpreting contracts.

However, it emphasises the point that parties to a contract should be explicit wherever possible on times and notice periods. Phrases like "close of business" and "end of day" have no legal meaning. They are open to interpretation and (as in this case) can lead to disputes.

Instead, where a deadline for serving notices is critical, the contract should refer to a specific time and day. If the parties' addresses for service are located in different time zones, it would also be sensible to state whether any time deadlines are in local time, or a single, specified time zone.


Co-written with our Litigation team

The High Court has held, in Astex Therapeutics Ltd v AstraZeneca AB [2016] EWHC 2759 (Ch), that legal advice privilege exists only between a lawyer and his client, and not the client's employees.

AstraZeneca ("AZ") conducted an investigation in which external and in-house lawyers interviewed employees. It later claimed legal advice privilege ("LAP") over the notes of those interviews. When LAP attaches to a document, a party may be able to withhold that document in legal proceedings and refrain from disclosing it to the other side.

However, the court found that LAP applies only to communications between a lawyer and client. If a company seeks legal advice, its employees will be "clients" only if they are among the people instructing the lawyers. In this case, the employees of AZ who were interviewed were merely providing information. They were not clients. AZ could not claim LAP over the interview notes, except in the cases where the interviewee was also instructing AZ's lawyers on the matter.

The decision is important for in-house lawyers. It should not raise issues where employees approach in-house counsel for advice, as there the employee will usually be the client. However, it is relevant where lawyers (in-house or external) obtain information from an employee in order to provide legal advice to someone else. These communications are unlikely to attract LAP.

It is therefore important to try, where possible, to ensure communications with employees attract litigation privilege. This might involve putting a paper trail in place to identify the specific litigation in contemplation and confirming the communications are for the dominant purpose of that litigation.


The Financial Conduct Authority ("FCA") is consulting on changes to DTR 2.5. DTR 2.5 supplements Article 17 of the European Union Market Abuse Regulation ("MAR"). Under Article 17 MAR, an issuer must disclose inside information to the market as soon as possible. However, Article 17(4) allows an issuer to delay disclosure if (among other things) it has a "legitimate interest" in doing so.

DTR 2.5 sets out when an issuer has a legitimate interest. ESMA has also published guidelines on what counts as a legitimate interest. As we mentioned in our update for 24-28 October, DTR 2.5 is more restrictive than the ESMA guidelines, meaning that, to an extent, the two conflict with each other.

The proposed changes are designed to remove this conflict. The FCA proposes to delete the parts of DTR 2.5 that conflict with the ESMA guidelines (particularly DTR 2.5.3G and the last sentence of DTR 2.5.5G) and instead include references to the guidelines.

A copy of the consultation can be found here. Responses are requested by 6 January 2017.


The Office of Tax Simplification has agreed to carry out a review of stamp duty on paper transactions with a view to simplifying it from a technical and administrative perspective. This will include considering the possibility of replacing or removing stamp duty on physical documents completely.

The review will not cover stamp duty land tax (SDLT) or stamp duty reserve tax (SDRT).

Businesses, advisers and others are encouraged to submit their views to