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WAREHOUSE RECEIPTS IN FOCUS – IF THE DEAL LOOKS TOO GOOD TO BE TRUE…


The Commercial Court (Mr Justice Bryan) recently handed down judgement in a case which has important implications for commodity financing, warehousing, logistics and more generally in relation to a service provider’s reliance upon limitation provisions.


The decision:


I. Affirmed that estoppel can only be used as a shield and not as a sword


II. Included an insightful analysis as to the relationship between the holder of a warehouse receipt and the warehouse


III. Considered what is required by way of notice in order to permit a party to rely on its standard terms and conditions to limit its liability in negligence


IV. Contained a detailed discussion of the reasonableness requirement contained in UCTA


In Natixis -v- Marex and Access World [2019] EWHC 2549 (Comm), the Court considered a four handed dispute. The background can be summarised as follows. Marex Financial (“Marex”) entered into various purchase and repurchase contracts with a Chinese company, CHH, for the sale of various parcels of nickel. Natixis agreed to buy the nickel from Marex pursuant to further spot purchase and re-purchase contracts (referred to as PC1 to PC5). The nickel was stored at warehouses owned by Access World and both purchases involved a set of transferable warehouse receipts which had originally been issued by Access World. By the time of the trial, it was common ground that the warehouse receipts provided by CHH to Marex which were in turn provided to Natixis were counterfeit. Following this discovery, Natixis closed out its futures position and claimed the sum of US$32 million in damages from Marex. Marex in turn brought claims against Access World in contract and for negligence and against its marine cargo insurers for an indemnity under the terms of its insurance policy.


In a wide-ranging judgement, the judge considered each of the claims in turn, save for that against the insurers, Marex’s claim against them having been compromised following cross examination of its witnesses. As a result, the judge did not need to consider (for the first time) whether there had been a failure to present the risk fairly under the new Insurance Act 2015. However, he did consider a number of other important issues.


Natixis succeeded on its straightforward case that Marex had breached its purchase contract in various respects, notably because Marex had failed to pass title in the nickel to Natixis. Marex’s construction argument, that it had simply promised to deliver whatever warehouse receipts Marex had been provided with, even if (as was the case) they were forgeries, was described by the judge as contrary to the ordinary and natural meaning of the clauses, uncommercial and unbusinesslike.


He found that, on the wording of the contracts, the obligation was to provide genuine warehouse receipts and that since Marex had failed to do so it was in breach of contract.


The judge also rejected Marex’s argument that the contracts should be avoided on the grounds of common mistake. Having decided against Marex on the issue of construction, the Court found that it bore the risk and assumed responsibility for any forged documents.


18 | ADMISI - The Ghost In The Machine | November/December 2019


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