Sanctions, force majeure. No obligation to accept payment in alternative currency.

MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) raises the question of whether the effect of financial sanctions obliges a contractual party to accept payment in a currency other than that specified in the contract. Mur Shipping BV (“the Owners” or “MUR”) concluded a Contract of Affreightment (“COA”) with RTI Ltd (“the Charterers” or “RTI”) in June 2016. Under the COA, the Charterers contracted to ship, and the Owners contracted to carry, approximately 280,000 metric tons per month of bauxite, in consignments of 30,000 – 40,000 metric tons, from Conakry in Guinea to Dneprobugsky in Ukraine. On 6 April 2018, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) applied sanctions (“the sanctions”) to RTI’s parent company, adding them to the Specially Designated Nationals and Blocked Persons List. This led to the Owners invoking a force majeure clause in the COA by sending a force majeure notice (“FM Notice”) on 10 April 2018 in which the Owners said that it would be a breach of sanctions for the Owners to continue with the performance of the COA and noted that the “sanctions will prevent dollar payments, which are required under the COA”.

The force majeure clause provided for the suspension of the obligation of each party to perform the Charter Party while such Force Majeure Event is in operation.  The clause provided that

“36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:

a) It is outside the immediate control of the Party giving the Force Majeure Notice;

b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;

c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;

d) It cannot be overcome by reasonable endeavors from the Party affected.”

The claim arose from the fact that RTI had chartered in 7 vessels when MUR, alleging force majeure, suspended performance of the COA in April 2018, and was based on the difference between the COA and chartered in rates for these 7 vessels.

The tribunal accepted that the effect of both “primary” and “secondary” sanctions was drastic. Thus, normal commercial counterparties would be frightened of trading with the party that has been sanctioned, bank finance was likely to be frozen, and underwriters would be reluctant to insure normal trading activities. The tribunal also held that sanctions had an impact on the ability of the Charterers to make US dollar payments to the Owners. The tribunal held that, but for one point, the Owners’ case on force majeure succeeded. The point on which it failed was that, applying the terms of the force majeure clause, it could have been “overcome by reasonable endeavours from the Party affected.” This was because the tribunal considered that the exercise of reasonable endeavours required the Owners to accept a proposal made by the Charterers to make payment in €. The tribunal described this as a “completely realistic alternative” to the payment obligation in the COA, which was to pay in US dollars.

Jacobs J held that the Tribunal had erred in their finding that “reasonable endeavours” required the Owners to accept the Charterers’ proposal to make payment in a non-contractual currency. A party does not have to perform the contract otherwise than in accordance with the contract in order to avoid a force majeure event. There was no reason to construe the force majeure clause as being concerned only with contractual obligations directly concerned with loading and discharging: the force majeure event may have an impact on other contractual obligations which then have the causative impact required by clause 36.3 (b). Jacobs J noted “Clause 36.3 (b) is an important part of the force majeure clause: it identifies the necessary consequence, as a matter of causation, of the “event or state of affairs” described in other parts of the clause. However, it is clear from clause 36.3 (c) that there may be a wide range of different matters which bring about the consequence that loading or discharge is delayed or prevented. Those matters include “restrictions on monetary transfers and exchanges”.

Commercial contracts, wasted expenditure and lost profits

Anyone drafting a commercial contract these days will invariably add, somewhere, some kind of exemption clause. Unfortunately the drafter is frequently in a hurry, aware that there are a limited number of billable hours he can plausibly attribute to a mere drafting exercise; and as often as not the clause will be lifted from some precedent in the firm’s files, without too much thought about what it might actually mean in real life.

One suspects that this is essentially what had happened in Soteria Insurance Ltd v IBM United Kingdom Ltd [2022] EWCA Civ 440. But whatever the history, the result was an expensive trip to the Court of Appeal because something like £80 million turned on the issue of the understanding of relatively few words.

To simplify, IBM agreed in 2014 to install a computer system for an insurance company, CISGIL, for a price of about £50 million. The contract contained a term which, while allowing a list of specific types of claim characterised as “direct loss” in the event of breach, contained a general disclaimer (Clause 23.3) as follows:

“[N]either party shall be liable to the other or any third party for any Losses arising under and/or in connection with this Agreement (whether in contract, tort (including negligence), breach of statutory or otherwise) which are indirect or consequential Losses, or for loss of profit, revenue, savings (including anticipated savings), data …, goodwill, reputation (in all cases whether direct or indirect) even if such Losses were foreseeable and notwithstanding that a party had been advised of the possibility that such Losses were in the contemplation of the other party or any third party”

There was also a damages cap of roughly £80 million.

Delays occurred; things went wrong; CIGSIL declined to pay a stage invoice tendered by IBM; and the contract came to an end. Each side blamed the other for the debacle. The judge (see [2021] EWHC 347 (TCC)) and the Court of Appeal both held that it had been IBM who had wrongfully repudiated the contract; with the tedious details of this we are not concerned.

At this point, however, the issue of damages arose. Seeing difficulties in claiming for its consequential loss of profits because of Clause 23.3, CIGSIL chose to quantify its claim instead by reference to its wasted expenditure, a figure eventually quantified by O’Farrell J at about £122 million. IBM at this point said that this was an exercise in pettifogging: whatever label CIGSIL chose to put on its claim, it was at bottom trying to claim for its loss of profits, which was precisely what Clause 23.3 prevented it doing.

O’Farrell J (see [2021] EWHC 347 (TCC) at [680]-[686] sided with IBM. CIGSIL was, she said, claiming for its loss of bargain; the measure of that loss of bargain was “the savings, revenues and profits that would have been achieved had the IT solution been successfully implemented.” And while CIGSIL was entitled to frame its claim as one for wasted expenditure if it so wished, that simply represented a different method of quantifying the loss of its bargain; it did not “change the characteristics of the losses for which compensation is sought”. It followed that the claim was inadmissible.

This certainly looked like a robust approach. It also chimed in neatly with modern academic analysis of expectation and reliance damages. At bottom both seek, in different ways, to put a claimant in the position he would be in had the contract been kept; either by showing the gains he would have made but now won’t, or by showing that an investment is now wasted that otherwise wouldn’t have been.

Nevertheless the Court of Appeal was having none of it. On a proper reading of Clause 23.3, the intention was indeed to exclude claims based on profits foregone, but to leave intact claims based on wasted expense. Even if both were similar animals on deep analysis, wasted expenditure did not fall within the meaning of loss of profit or revenue; from which it followed that in the absence of a specific reference to wasted expense, this remained recoverable.

Despite the seductive, apparently no-nonsense approach of O’Farrell J, we think the Court of Appeal got it right. When dealing with the interpretation of exception clauses, the fundamental issue is not any question of academic argument or analysis, but simply what reasonable businesspeople would have made of the words used. And a non-lawyer would undoubtedly say that money wasted was not the same thing as future gain foregone. Furthermore, as the Court pointed out, they would also have seen that there could be good reason to allow the former on the basis that it was likely to be relatively quantifiable and predictable, but to exclude the latter as likely to be open-ended and unquantifiable.

This case is thus good news for business certainty. Nevertheless, those drafting commercial contracts would do well not only to read it but to draft their contracts even more carefully. If those in the position of IBM do not like a result under which they remain liable for seven-figure sums in wasted expenditure, they can always exclude such claims expressly. They should also perhaps take the trouble to add that any such limit applies also to cases of repudiation, since even despite Soteriou, as a result of the decision in Kudos Catering (UK) v Manchester Central Convention Complex [2013] EWCA Civ 38, there remains a possibility that some clauses may be construed as being limited to mere defective performance and not applying to actual repudiation.

If a client complains about the number of billable hours devoted to such issues of drafting, a solicitor can always murmur in his ear that the investment is probably a good one. The Court of Appeal is an expensive place to end up in, however interesting its judgments may be to other practitioners and law professors, and no sensible businessman should want to go there if he can possibly help it.

Exceptions to the Running of Laytime- “Wording” is the Key (Bad Weather?)- London Arbitration 21/19


In commercial contracts, exclusion clauses are often construed narrowly. In the context of voyage charterparties, this could create significant difficulties for charterers who attempt to rely on an exclusion clause to stop the running of laytime or demurrage.

In the contract in question, it was expressly stipulated that … if … loading… [was] … suspended: [a] due to bad weather (including… storms, high winds…) or [b] for other reasons not attributable to charterers or their shippers/receivers, laytime and demurrage would not count.

At the port of loading, the laytime period started on 25 August. A tropical storm was approaching to the loading port but loading continued and the terminal indicated at 13.00 hours on 26 August that there was no present intention to shut-down due to the fact that the approaching hurricane’s land fall remained uncertain. However, at 15.30 hours on the same day, the terminal stopped loading and the vessel was advised to leave for anchorage. The terminal informed the vessel that they had no alternative but to vacate the vessel as weather conditions would make anchorages scarce and they had to consider the safety of their docks, fleet and terminal. The port remained closed for the next few days and on 29 August the vessel re-berthed and completed loading. The main legal issue was whether laytime stopped when the vessel was ordered off the berth.

It was held that the laytime was not suspended when the vessel left the berth on 26 August as for laytime to be suspended under a clause of this nature it was necessary to show that time was lost due to bad weather. The tribunal observed that it was impossible to calibrate the imminence and nature of bad weather when the vessel sailed away on 26 August but was adamant that the facts did not suggest that loading as suspended due to bad weather. What led tribunal to this conclusion was the fact that the hurricane was still at least 2 days away and there was no immediate danger to shipping. The terminal’s decision to close the facility was based on its desire to ensure the safety of its barges and there was also concern that vessels would find it difficult to find anchorages if they stayed any longer in the terminal.

However, the charterers managed to convince the tribunal that the running of laytime was suspended for “reasons not attributable to charterers or their shippers/receivers”. They got the decision of the tribunal in their favour on this point as they successfully argued that they had no connection with the terminal so the actions of the terminal were not attributable to them. It was stressed by the tribunal that shippers and the terminal were separate legal entities with no agency relationship.

The first part of the decision is in line with the precedent set in a number of authorities most notably Compania Crystal de Vapores v. Herman [1958] 2 QB 196 where the chartered vessel ordered from the berth by harbour master due to threat of bad weather. There, it was held that time lost as a result of measures taken for safety of the ship as a result of bad weather does not count. It is vital that bad weather should potentially prevent the loading/discharge. Therefore, to suspend the running of laytime in a case like this, charterers would need to show that the relevant clause refers not only to “bad weather” but also to “steps taken due to bad weather”. The finding on the second part of the clause was fact based and the decision went in favour of the charterer as the owner failed to show that there was any organic relationship between the charterers/shippers and the terminal. However, it is evident that the wording adopted makes this a very broad exception and could potentially provide relief to charters in most instances.

Of damages and counterfactuals — again

It’s not often that we can say “You read it first on the IISTL blog.” But it seems we may be able to, following the decision of the Court of Appeal (Males, Rose and Haddon-Cave L.JJ.) in Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102.

The facts briefly recap thus. A charterer signed a CoA promising to come up with vast cargoes of Brazilian iron ore that would have netted the shipowner profits of something like $20 million. It didn’t, and in hindsight it was abundantly clear that it it never could have. The contract was subject to a force majeure clause including floods preventing performance. Floods duly materialised; but (as was held both at first instance and on appeal) the charterer couldn’t invoke the clause, since if it had never had any cargoes in the first place the floods hadn’t prevented it doing anything. Nevertheless Teare J held at first instance that even though there was breach the damages were not $20 million, but zilch (or rather nominal). His argument was that, hindsight having shown that the shipowner wouldn’t have had a right to performance even if the cargoes had been there, the value of the lost rights was zero.

We raised an eyebrow here at the idea that a defendant who hadn’t, and never could have, performed should be able to cut damages from $20 million to zero by pointing to a force majeure clause that might have protected him but in fact didn’t. The Court of Appeal has now made it clear that it thinks the same way, and substituted an award of $20 million. If (it was said) a claimant showed that a defendant had failed to perform and the defendant could not invoke any exculpatory provision, there was no reason why damages should not be substantial. The reasons behind the non-performance were irrelevant, as was the fact that had the defendant been able to perform in the first place he would have had an excuse.

In our view, despite the beguiling advocacy of the Institute’s own Simon Rainey QC, this is sensible and logical. Males LJ hit the nail on the head at [89] when he pithily pointed out that the breach was not inability or unwillingness to supply cargoes, but the simple fact that the cargoes, for whatever reason, were not there. Put that way, everything neatly falls into place. If you don’t perform your contract and can’t point to any excuse, you are liable for substantial damages. End of story.

Carriage contracts mean what they say, OK?

Open any contract textbook at the chapter on exception clauses, and you will come across a long list of cases on the restrictive interpretation of such clauses, saying that (for example) they will not lightly exonerate a party from the consequences of his own fault in the absence of clear words; that if a clause could cover both negligence and strict liability it will presumptively only cover the latter; that ambiguities will be construed contra proferentem; and so on.

As usual, however, things are not as they seem. No doubt such matters have formed the stuff of contract lectures and provided law professors with enjoyment for as long as most of us can remember. Outside academia, however, commercial lawyers today can pretty safely treat them as a mere empty ritual incantation and then go on quietly to ignore them.

The latest demonstration of this point comes in a case decided six weeks ago but only just reported, Aprile SpA v Elin Maritime Ltd [2019] EWHC 1001 (Comm). On the facts as assumed, steel fabrications were carried on deck from Thailand to Algeria under a straight bill stating that they were so carried and continuing: “ The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising prior to loading into or after discharge from the Vessel or while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.” The cargo did not arrive in one piece, and cargo — or its insurers — wanted to bring a claim. Faced with the unpromising terms of the bill of lading (which was unaffected by the Hague Rules because of the statement of deck carriage), they argued, with a touching hope, that for all its wideness the exemption did not cover any damage caused by negligence or unseaworthiness.

The deputy judge, Stephen Hofmeyr QC, was having none of it. In line with a series of recent authorities such as Persimmon Homes Ltd v Ove Arup & Partners [2017] EWCA Civ 373, he held that the exception clause had to be read, like any other contract term, with a view to seeing what it would mean to a reasonable businessperson, taking into account the circumstances surrounding the contract. He saw no reason to interpret the words “howsoever arising” as meaning anything other than what they said, or to regard claims alleging negligence or unseaworthiness as raising any special issue in this connection. He expressed the view that Langley J had been right to suggest as much in The Imvros [1999] 1 Lloyd’s Rep 848, and saw no justification in criticisms later made of that case. Equally he joined in the general tendency to sideline Canada SS v R [1952] AC 192 and its suggestions for cutting down the presumptive meaning of clauses that did not mention negligence in so many words. The argument that there might be strict liability as a common carrier and that the exception clause might have been intended to be limited to that he treated with the disbelief it richly deserved.

In short, in carriage as elsewhere commercial contracts mean what they say; complex rules of interpretation, and outdated presumptions about exoneration for fault, have little part to play. And rightly so. Carriers and cargo interests alike are keen on English law and jurisdiction precisely because they know their contracts will be read in a common sense and businesslike way. The deputy judge here needs, if one may say so, to be commended for approaching this case with a realistic and hard-headed attitude, and not disappointing them.

‘Howsoever caused’ in exception clause in bill of lading covers loss due to negligence and unseaworthiness.  


The Elin (Aprile S.PA. v Elin Maritime Ltd) [2019] EWHC [1001] (Comm) involved a claim under a bill of lading for damage to a cargo carried on deck which was stated to be so carried, and was therefore not subject to the Hague Rules. Owners sought to rely on two clauses.

1- the provision on page 1 of the Bill of Lading that “The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising … in respect of deck cargo”

2- the provision on page 2 of the Bill of Lading that the 70 packages identified on the attached list were “loaded on deck at shipper’s and/or consignee’s and/or receiver’s risk; the carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising”.

Owners argued that these two provisions must be interpreted as excluding all liability for carriage of deck cargo, including liability for negligence and unseaworthiness.. The phrase “howsoever arising”, which appeared in each of the clauses referred to all causes of loss or damage. The Owner relied on the decisions of Saville J,  Langley J and Hamblen J in The Danah [1993] 1 Lloyd’s Rep 351, The Imvros [1999] 1 Lloyd’s Rep 848 and The Socol 3 [2010] 2 Lloyd’s Rep 221, respectively.

Stephen Hofmeyr QC, sitting as a Judge of the High Court agreed. Nothing in the authorities to justify departing from that point of construction. The same or similar words of exclusion have been held to be effective to exclude both liability for negligence causing the loss of cargo (Travers v Cooper [1915] 1 K. B. 73 and  [1993] 1 Lloyd’s Rep. 351) and liability for unseaworthiness causing the loss of cargo (The Imvros). It would be difficult to imagine words of exemption which are wider in effect than “howsoever caused”. Over the last 100 years, they had become “the classic phrase” whereby to exclude liability for negligence and unseaworthiness. Accordingly on a true construction of the Bill of Lading, the Owner was not liable for any loss of or damage to any cargo carried on deck, including loss of or damage to any cargo carried on deck caused by the unseaworthiness of the Vessel and/or the Owner’s negligence.

Force majeure and counterfactuals

A nice force majeure issue — and one of considerable importance — came up before Teare J yesterday in Classic Maritime v Limbungan [2018] EWHC 2389 (Comm), argued by IISTL stalwart Simon Rainey QC. Imagine you conclude a contract (in this case a CoA under which you have to provide a number of iron ore cargoes) which in the event you can’t and don’t perform, and never could have performed. An exemption clause in the contract says that if you could have performed it but a force majeure event X (inundations in Brazilian iron ore mines) then occurs that stops you performing it, you are not liable for breach. Event X occurs. Are you (a) in breach of contract, (b) on the hook for substantial damages?

On (a) the answer is Yes. You promised to perform, you haven’t performed, and because you never could have performed in any case you can’t shelter behind the exemption clause.

But what about (b)? There are two ways to look at this. One is to say: this is a simple case of unexcused non-performance, and hence you must be liable to the shipowner for his lost profits on the carriage, a figure amounting to many millions. The other point of view runs thus. If, counterfactually, you could have performed but for X, the shipowner would in the event have had no claim to performance because of the exemption clause. Hence hence it’s no skin off his nose that you didn’t perform, and damages are nominal only. Teare J plumped for the second: nominals only.

This view is highly plausible and for the moment clearly represents the law. It also dovetails quite nicely with the general rule in cases such as The Golden Victory [2007] UKHL 12, [2007] 2 A.C. 353 and Bunge v Nidera [2015] UKSC 43, [2015] 2 CLC 120, that in assessing damages we take into account later events that would have taken away the right to demand performance.

But this case, or the issue in it, may go further. There is a respectable argument, that certainly can’t be dismissed summarily, which suggests a different answer. In so far as the inability to rely on a force majeure clause is due to a party’s own default, which was the case in Classic Maritime, should it be open to that party to argue that if he had acted differently he would have been able to invoke that very same clause? Suppose a force majeure clause requires notice to be given within 7 days after the force majeure event; a party prevented by force majeure nevertheless fails to give notice for 10 days, and thus loses the protection of the clause. Is it really open to the party then to say that if he had given the proper contractual 7 days notice he would have been protected by the clause, the counterparty would have had no right to demand performance, and hence damages are nominal only? I’m doubtful. And I’m equally not sure that this scenario is that different from what happened in Classic Maritime.  It’s just a thought. Whether it’s a good one, only time will tell.

Maritime or non-maritime? The status of oilfield contracts in Louisiana



On 8 January 2018 the Fifth Circuit  en banc (In re Larry Doiron, Inc., (5th Cir. Jan. 8, 2018 No. 16-30217)) reworked the test for determining whether oilfield contracts are maritime or non-maritime in nature. Under maritime law knock for knock indemnity clauses in oil field service contracts are valid, but under anti-indemnity statutes in some states, such as Louisiana and Texas, they are invalid.


The case involved flowback operations performed in state waters on a fixed platform. The master service contract for the flowback work did not call for any vessel involvement. However, during the job the flowback contractor, STS, found a crane was needed to manipulate some of the flowback equipment. A tug and barge were needed to get the crane to the platform and the platform owner had to charter in vessels to allow the flowback contractor to do its work. required the platform owner (Apache) to subcontract with Larry Doiron Inc to charter in the necessary vessels to allow STS to do its work under the MSC.   During the ensuing operations, an STS technician was injured, and LDI sought indemnity from STS under the terms of the Apache-STS MSC (which provided for indemnity from STS to Apache and any of Apache’s subcontractors).


The Fifth Circuit set out a new two part test to determine whether or not the contract is maritime in nature. First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? Second, if the answer to the above question is “yes,” does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is maritime in nature.


Applying this new test to this case, the oral work order called for STS to perform downhole work on a gas well that had access only from a platform. After the STS crew began work down hole, the crew encountered an unexpected problem that required a vessel and a crane to lift equipment needed to resolve this problem. The use of the vessel to lift the equipment was an insubstantial part of the job and not work the parties expected to be performed. Therefore, the contract was non maritime and controlled by Louisiana law which barred the indemnity under Louisiana Oilfield Indemnity Act.

Lending $150 million to an oil company? Don’t worry too much about UCTA.

The decision in African Export-Import Bank & Ors v Shebah Exploration & Production Co Ltd & Ors [2017] EWCA Civ 845 , dismissing an appeal from Phillips J (noted here in this blog), contains few surprises and much relief. A syndicate of three banks, one Egyptian and two Nigerian, lent $150 million or so to a speculative Nigerian oil exploration company which — surprise, surprise — failed to pay most of it back. The lenders did the obvious thing, accelerated the loan and filled in the form asking for summary judgment. Hoping to stave off the evil day, the company and its two guarantors raised what looked like a fairly speculative set-off of a cool $1 billion, essentially suggesting that one bank had wrongfully dragged its feet over making the loan, and that another had broken the terms of a different, earlier, facility. The lenders sought to shut out this effort to muddy the waters by invoking an explicit anti-set-off clause. The borrower for its part argued that it had dealt on the lenders’ written standard terms of business and that the clause was clearly unreasonable under s.3 of the Unfair Contract Terms Act 1977(!). Phillips J disagreed and gave judgment in short order, pointing out that the terms, standard ones drafted by the Loan Market Association, had been extensively negotiated, and that it would be rare indeed for a party to be able to argue that a standard set of conditions like this was used so inflexibly as to attract the operation of s.3.

The Court of Appeal agreed wholeheartedly. They pointed out that the borrowers, who had to prove the use of written standard terms of business, had not even called any evidence to that effect. This would not do: as Longmore LJ drily put it at [33],

“A party who wishes to contend that it is arguable that a deal is on standard business terms must, in my view, produce some evidence that it is likely to have been so done. … It cannot be right that any defaulting borrower can just assert that business is being done on standard terms and that the lender then has to disclose the terms of other (how many other?) transactions he has entered into before he is entitled to summary judgment.”

Although he accepted that inflexible use of a third party’s standard terms might theoretically trigger s.33, he also pointed out that any substantial degree of negotiation would negative this, and also that the negotiation need not necessarily relate to the terms potentially caught by the 1977 Act.

As I said, a result which will be welcomed in the Square Mile. It will rightly reassure lenders that they can make their loans subject to English law safe in the knowledge that the courts here will give short shrift to snivelling arguments based on an Act which was never intended, one suspects, to protect highly commercial borrowers like this.

Of course, to make assurance doubly certain, there might be something to be said for strengthening the blanket exception to the 1977 Act in s.26 so as to encompass not only international supply contracts but contracts for loans or financial services between corporations with places in different jurisdictions. With the Queen’s Speech reduced this Parliament to about the length of a fireside chat, an under-occupied Government might even find Parliamentary time for the necessary change.

Exemption clauses mean what they say — and so does the Misrepresentation Act 1967

Common sense in spades yesterday from the CA, in one of Moore-Bick LJ’s last judgments, contained in the financial misinformation case of Taberna Europe CDO II Plc v Selskabet AF [2016] EWCA Civ 1262. Taberna bought loan notes issued by Roskilde, a thoroughly bad Danish bank. They bought them not directly but on the secondary market from Deutsche Bank, allegedly on the basis of negligent misrepresentations by Roskilde. In due course, having lost their money, they claimed under the Misrepresentation Act 1967, s.2(1), against the successor body to Roskilde, which it was arguable under Danish law had to pick up the tab for misrepresentation claims. Three interesting issues arose:

(1) Roskilde’s pitch included two exemptions: “No liability whatsoever is accepted as to any errors, omissions or misstatements contained herein”, and “Neither the Bank nor any officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this presentation for any purpose.” Eder J held them inapplicable to Taberna’s claim on the basis of contra proferentem and Canada SS Lines v R [1952] AC 192. The CA disagreed, downplaying the supposed presumption against exoneration for negligence, and saying (at [23]): “In the past judges have tended to invoke the contra proferentem rule as a useful means of controlling unreasonable exclusion clauses. The modern view, however, is to recognise that commercial parties (which these were) are entitled to make their own bargains and that the task of the court is to interpret fairly the words they have used.” This adds to a line of recent cases (and in our view a very sound one) to similar effect, most recently Transocean Drilling v Providence Resources [2016] EWCA Civ 372, noted here in this blog.

(2) Did s.2(1) of the Misrepresentation Act apply at all, since Taberna bought from Deutsche Bank and not Roskilde? Eder J had held that the Act applied, because by buying the notes Taberna came into contractual relations with Roskilde, presumably by assignment. This holding looked odd at the time, and the CA specifically discountenanced it: the 1967 Act applies only to contracts directly induced between representor and representee.

(3) Was contributory negligence pleadable against a claim under s.2(1) of the 1967 Act? The answer, again sensibly, was said to be Yes, though the question didn’t arise since (a) Roskilde wasn’t liable anyway and (b) Taberna hadn’t been negligent.

Altogether a good day for down-to-earth contract lawyers. We congratulate Sir Martin and wish him a happy retirement.