Numerous commercial and corporate contracts make reference to an event occurring at the ‘close of business’. This is often accompanied by a specific time, but in a recent judgment, the High Court considered the question of how the phrase ‘close of business’ should be interpreted if there is no reference to a specific time (Lehman Brothers International (Europe) (In administration) v Exxonmobil Financial Services BV [2016] EWHC 2699 (Comm)).
The notices clause in the agreement in question provided that, in order for a particular type of notice to be deemed received on a particular day, it must be received before ‘close of business’. The contract did not provide clarification on when ‘close of business’ occurred.
ExxonMobil submitted a notice to Lehman’s London offices at 6.02pm on 22 September 2008. Lehman submitted that the notice should be deemed received on the following day because a reasonable person would regard ‘close of business’ in London as being 5pm. ExxonMobil argued that ‘close of business’ should be 7pm. The judge rejected Lehman’s submission: given the nature of the business (repo financing extended by an oil major to an international investment bank), a reasonable person might be surprised to hear that close of business is 5pm. This was not the case. The onus was on Lehman to establish when close of business occurred. Lehman had failed to submit any admissible evidence; that was sufficient to decide the point in favour of ExxonMobil.
The issue of when ‘close of business’ occurred for ‘commercial banks’ in London was also considered. A working definition from the Financial Times lexicon was put forward to the court. The judge took the view that the expression ‘commercial banks’ did not have a particular meaning in English law. Lehman submitted that the expression ‘commercial banks’ suggested normal business hours, such as are worked by ordinary businesses and high-street banks. Lehman argued that this was a further pointer towards ‘close of business’ being 5pm (if not earlier).
The judge rejected this. Lehman’s experts did not give evidence on the subject. The only evidence came from ExxonMobil’s expert, who suggested that modern commercial banks closed at 7pm as a rough approximation. The judge said that there was no reason not to accept his evidence but stressed that this was a finding of fact limited to this case.
Even though the point is limited to commercial banks and noting the caveat, the case remains of interest given the lack of English judicial authority on the point.
If you would like further legal advice on ‘close of business’ or any other corporate matters, please get in touch with Farleys corporate solicitors in Lancashire and Manchester on 0845 287 0939 or send your enquiry online through our contact form.
