High Court judgment in indemnity dispute

On 15 January 2025, judgment was handed down in NatWest Markets NV & Anr v CMIS Nederland BV & Anr [2025] EWHC 37 (Comm), in which Jonathan Davies-Jones KC and Teniola Onabanjo, instructed by DLA Piper UK LLP, acted for the successful Claimants.

The Claimants sought declarations that c.€155million was due from the Defendants under seven Deeds of Indemnities (“the Deeds”) entered into in connection with seven mortgage-backed securitisations. The amounts claimed under the Deeds were in respect of certain payments to which the Claimants were entitled under Swaps transactions (“the Swaps”) with the securitisation special purpose vehicles (“the Issuers”).

The Defendants contended that the Issuers had the benefit of payment deferral provisions under the terms of the ISDA Master Agreements governing the Swaps and so long as the payment deferral provisions applied, the relevant amounts were not due or payable by the Issuers under the Swaps and that consequently, the sums were not “due” to the Claimants within the meaning of the Deeds. Further, that the Deeds were contracts of guarantees rather than true indemnities, and the principle of co-extensiveness applied to them and defeated the claims.

Nigel Cooper KC (sitting as a Deputy High Court Judge) rejected the Defendants’ arguments. He found that: (i) whilst the payment deferral provisions postponed the payment date for the Issuers, they did not affect the accrual of the debt obligation or the fact that amounts were owing; and (ii) upon proper construction of the Deeds, the word “due” was used to refer to sums which had accrued due so that there was an existing obligation in debt irrespective of whether payment had been deferred. He further found that, upon proper construction, the Deeds were contracts of indemnity and not contracts of guarantee, and the principle of co-extensiveness did not apply to them.