Sometimes contracts have a term implied that means the exercise of contractual discretion must not be arbitrary, capricious or unreasonable (known as the Braganza duty, about which we have written  previously Time to decide…how to exercise contractual discretion five years after the Braganza case).  A recent judicial review relating to complaints concerning alleged algorithmic market manipulation gives insight into how to construe clauses that may imply such a Braganza duty.

The complaints

The recently decided judicial review R (TF Global Markets (UK) (trading as ThinkMarkets)) v Financial Ombudsman Service Limited [2020] EWHC 3178 (Admin) involved the challenge by TF of the Ombudsman’s decision to uphold complaints of three of TF's customers (the Interested Parties). Such complaints were the result of the Interested Parties' suspension from TF's financial trading platform, and TF's decision to withhold large sums of money from them, on the grounds of TF’s suspicions that their accounts had used robots or algorithms to exploit price latency between the market price and the prices on TF's platform.

The contract

The judgment in this case primarily revolved around three clauses of TF’s Client Terms and Conditions:

Clause 7.8: "We reserve the right to refuse any trades placed by you that we judge to be clearly outside the prevailing market price such that they may be deemed non-market price Transactions, ... Where we have opened or closed a trade before becoming aware of the price disparity, we may at our absolute discretion either treat that trade as void";

Clause 7.10: “Transactions that rely on price latency or arbitrage opportunities may be revoked at our discretion

Clause 18.2: the client warranted that, in relation to each transaction, it would not behave “in a manner that would amount to market abuse and/or market manipulation”. In the event of breach of such warranty, or where TF has grounds for suspicions of such breach, TF may in its “absolute discretion” close transactions of the relevant account/treat transactions as void.

The court had to determine what the clauses meant. TF said the clauses allowed them to decide, subject to the Braganza duty, whether the Interested Parties had engaged in price arbitrage, even if they decided it was only a possibility. The Ombudsman said that TF were only relying upon clause 7.10 and pursuant to that clause the Braganza duty only arose if arbitrage based upon price latency had in fact taken place which required a determination of fact rather than an exercise of judgment. It was consequently for the Ombudsman to determine on the balance of probabilities whether arbitrage had taken place.

The court considered the authorities relating to contractual interpretation, setting out the established principle that the court will find clauses’ objective meaning, and to do so the whole contract must be considered as context. 

The decision

The court held that the Ombudsman had erred in:

- the construction of clause 7.10.  The Ombudsman placed too much reliance on the words "that rely on" in 7.10 to mean that there had in fact been, on the balance of probabilities, price arbitrage.  Instead, reading the contract as a whole - including phrases such as "we judge" (used in clause 7.8) - the contract was drafted to give TF contractual discretion which allowed them to make a decision even if there was only a suspicion of price arbitrage.

-  the final decision with respect to each of the Interested Parties in deciding on the balance of probabilities that the Interested Parties had not been trading by taking advantage of price latency or being engaged in arbitrage;

- finding that TF could rely upon clause 7.10 only, and not rely upon clause 18.2.

It was not for the court to determine whether TF exercised its discretion reasonably; that will go back to the Ombudsman. The Ombudsman will need to consider in each individual case whether TF exercised its discretion reasonably, that is not arbitrarily, capriciously or unreasonably. That will require the Ombudsman to give detailed consideration to the evidence available to TF at the time of making the decision to close the accounts and withhold the profits of each of the individuals.


This case bears some similarities to, but the court found differed from, the case of Shurbanova v Forex Capital Market Limited [2017] EWHC 2133, in which Forex revoked Shurbanova’s forex trades on the basis they had been 'abusive', in breach of its terms of business (and which we wrote about previously).  Those exercising contractual discretion will need to consider carefully whether a Braganza duty is implied and the possibility that those subject to the decision will seek to challenge it.  This case reminds us that the meaning of each contract will be fact-specific, but that the usual rules of contractual construction apply to determining whether a Braganza duty is implied.

This article was written by Genevieve Vaughan and Tom Whittaker.