In order to lower the effective interest rate payable by it on a loan of £14,056,000, the taxpayer and its bank agreed that at the time the bank paid £14,056,000, to the account of the taxpayer, the bank would debit a U.S.-dollar loan facility with the equivalent sum in U.S. dollars and that the bank would purchase for the taxpayer's account for forward delivery enough U.S. dollars to enable the taxpayer to repay the outstanding principal on the U.S.-dollar loan facility on its maturity date.
Although the U.S. dollars delivered under the contract appreciated significantly, Sir John Vinelott found (at p. 137) that:
"... the agreement between the company and the bank was a single composite agreement under which the company could not deal with the forward contract without the consent of the bank and under which the bank was to be at liberty to use the dollars purchased in discharge of the dollar loan, to the extent that that had not been repaid before 15 March 1983. If that is right, it must follow that the company did not make any profit on the forward purchase of dollars and made no sterling loss on the repayment of the dollar loan, ..."
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