CONTENTS

Introduction to this Update

In this issue, we examine the following topics:

  • International sales of goods, the independence of demand guarantees, claims against a bank for wrongful receipt of moneys and claims in conversion
  • Debt ranking, payment and distribution
  • Investment products: the duty of a selling or advising bank
  • Securities lending transactions
  • Authority to bind a principal to a contractual obligation
  • Choice of jurisdiction clauses
  • State immunity from enforcement against assets
  • Recognition and enforcement of a foreign arbitral award
  • Appointment of administrators

International sales of goods, the independence of demand guarantees, claims against a bank for wrongful receipt of moneys and claims in conversion

The Court of Appeal has considered a number of issues arising from an international sale of goods transaction, including the autonomy of a demand repayment guarantee (for an advance payment) that had been issued by the seller's bank; the liability of the buyer's bank for moneys that the bank had received relating to wrongful sub-sales by the purchaser of the goods; the liability of the buyer's bank in conversion where that bank, which had opened a letter of credit in favour of the seller, had wrongly refused to return the documentation relating to some of the goods when presentation had been rejected; and whether the seller had an obligation to mitigate its loss in relation to its claim in conversion. The principal judgment was delivered by Moore-Bick LJ, with whom Sir Anthony Clarke MR and Laws LJ agreed.

The facts

The transaction concerned a sale on FOB terms of 50,000 metric tonnes of cotton by the seller in Uzbekistan to an English purchaser, with the sale to take place by a series of consignments over a period of months. The purchase price was payable as to 90% of the total price by an advance payment prior to delivery of any of the cotton, with the remaining 10% of the price for each consignment being payable under a letter of credit opened by the buyer's bank in favour of the seller. The advance payment was funded by a syndicated credit facility arranged by the buyer's bank, which was also the agent and security trustee under the facility. As security for repayment of the facility, the bank took an assignment of the buyer's rights in the sale contract and the cotton and over the proceeds of any sub-sales by the buyer. It also had the benefit of the repayment guarantee that will be mentioned below. The buyer opened an account with its bank for receipt of moneys from sub-sales, which were then to be distributed amongst the syndicate by the bank (in its role as agent and security trustee), with any remaining balance to be paid to the buyer as its profit.

In return for the advance payment, the seller arranged for its bank to issue a demand repayment guarantee in favour of the buyer's bank, which would cover the seller's obligation to refund the advance payment if it failed to deliver the cotton. The document was expressed to be subject to UCP 458 (Uniform Rules for Demand Guarantees). The guarantee provided that its face amount would be reduced by the value of cotton supplied from time to time under the principal contract, such supply to be proved by delivery of the relevant documentation under the letter of credit.

Some of the cotton was delivered in accordance with the overall arrangements and the face amount of the refund guarantee was reduced accordingly. In other cases, the transaction did not run smoothly and there was a dispute as to whether the correct documents had been presented under the letter of credit with respect to the relevant consignments, and the presentations were rejected. As a result, those consignments could not be treated as having been delivered to the buyer under the contract. Notwithstanding this, the buyer managed (in some cases by unlawful means) to obtain a large number of those consignments of cotton, which it re-sold, having made payment of the proceeds of such sub-sales into the account with its bank. The consignments that were not obtained by the buyer were not shipped and remained in warehouses awaiting delivery. The buyer's bank wrongly refused to return the disputed documentation to the seller, but it did suggest that where cotton remained in warehouses, it should be sold and the proceeds of sale held pending resolution of the dispute as to entitlement.

In addition to this, the buyer's bank made demand under the refund guarantee with respect to all the disputed consignments, whether or not the buyer had obtained possession of the relevant cotton. This resulted in the buyer's bank obtaining full payment of the outstanding principal amount under the guarantee. One consequence of this was that the buyer's bank received an element of double payment. This related to those consignments where the buyer had wrongfully taken into its own possession the relevant goods, which it then resold and paid the proceeds of its re-sales into the designated account with the buyer's bank. The bank had also received payment with respect to those consignments under the refund guarantee.

There was no point in the seller, or its bank, attempting to pursue the buyer to obtain recompense, because the buyer had become insolvent. Accordingly, they attempted to pursue the buyer's bank. The case was brought by the seller, in its own capacity and as assignee of any claims that its own bank had against the buyer's bank.

The claims

For the purposes of this note, the relevant claims that were made against the buyer's bank were framed as follows. First, that it was an implied term of the refund guarantee that the buyer's bank, as the beneficiary, would repay the amount by which the sum demanded and received under the guarantee exceeded the real loss sustained by the buyer or its bank (ie, for the element of double payment). Secondly, that the buyer's bank was a constructive trustee for the seller of the proceeds of the re-sales of the disputed consignments, because the bank had received them in the knowledge that the buyer had obtained possession or control of the relevant goods wrongfully. Thirdly, that the bank was liable to the seller in the tort of conversion with respect to the consignments where the bank had wrongfully refused to return the documents of title. To this last claim, the bank argued that if it was so liable, the seller had failed to mitigate its loss by agreeing to the sale of the goods that remained in warehouses as the bank had suggested. Accordingly, the damages to be awarded against the bank should be reduced to take account of the loss that would not have been suffered by the seller if it had adopted the bank's London 5040246.1 4 suggestion (ie, storage costs and a fall in the value of the goods held in the warehouses).

In the event, neither the first nor the second claim succeeded and the seller was held to have failed to mitigate its loss in the claim for conversion.

Refund for double payment

This claim was founded on the implication of a term in the refund guarantee, to the effect that the buyer's bank, as the beneficiary, would repay the amount by which the sum demanded and received under the guarantee exceeded the real loss sustained by the buyer or its bank, so that the buyer's bank was obliged to repay the element of the double payment that it had received. The claim was rejected, principally because it was inconsistent with the concept that such an instrument, issued by a bank, was an independent and autonomous instrument which was separate from the commercial transaction to which it related, and that its only terms would be those expressly set out in it or in UCP 458 which it expressly incorporated. The obligations undertaken in such an instrument should be confined entirely in accordance with what was stated on the face of the instrument. The issuer was obliged to make an unequivocal payment if the conditions set out in the instrument were satisfied. The effect of an implied term such as that alleged would be to make the instrument uncertain and it would then be unclear how the obligation of the issuer could be ascertained with clarity. The obligation of the issuer of the refund guarantee was to pay in accordance with a demand duly made under it. The issuer was not concerned with whether the beneficiary (the buyer's bank) had received any funds from the buyer, nor was it concerned that the buyer's bank held the proceeds of payment under the instrument as security with respect to the funding arrangements between the syndicate and the buyer.

The case law indicated that if any refund fell to be paid, that would be dealt with between the commercial parties (eg. the buyer and the seller) in pursuance of the underlying transaction: see Cargill International SA v. Bangladesh Sugar & Food Industries Corp [1996] 2 Lloyd's Rep 524 and Comdel Commodities Ltd v. Siporex Trade SA [1997] 1 Lloyd's Rep 424. The mechanics for making the refund were discussed in obiter comments in Tradigrain SA v State Trading Corp of India [2006] 1 Lloyd's Rep 216. There has also been recent discussion on the right to refunds in Van Der Merwe v. IIG Capital LLC [2008] EWCA Civ 542. The fact that it was not worth pursuing the buyer for a refund in this case because it was insolvent did not affect this analysis. The independence of the instrument from the underlying commercial transaction was the predominant factor.

Moore-Bick LJ also dismissed an argument that because the buyer had obtained the goods outside the mechanism for payment provided by the letter of credit, that had the effect of treating the outstanding amount under the refund guarantee as reduced by the value of the goods, as if it corresponded to a reduction that accorded with the procedures explicitly mentioned in the guarantee. Once again, this was because it did not meet the need for strict compliance with the express terms of the instrument and the mechanics established under it.

Constructive trustee

The seller's claims under this heading against the buyer's bank were based on the fact that the buyer paid the proceeds of its sub-sales of goods which were owned by the seller into the designated account at the buyer's bank. The seller claimed that either the proceeds were its funds in absolute terms or that the bank was liable to the seller because the bank had knowingly received the funds which were subject of a trust in favour of the seller.

In relation to the first of those alternatives, it was held that the buyer probably held the proceeds of the subsales on trust for the seller (see Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v. Islington LBC [1996] AC 669, at 716). Nonetheless, it would not be possible to identify the funds which it was claimed belonged to the seller because they were not separately identified when paid into the designated account, where they were mixed with other receipts and, as so mixed, were distributed to the syndicate shortly after receipt.

In relation to the claim against the buyer's bank based on knowing receipt of trust property, it was necessary to show that the bank, as the recipient, had the necessary degree of knowledge of the seller's beneficial interest in the funds. The test for this is that recipient's state of mind must be such as to make it unconscionable for it to retain the benefit of the property (per Nourse LJ in Bank of Credit and Commerce International (Overseas) Ltd v. Akindele [2001] Ch 437, at 455). It must possess that knowledge as at the time of receipt or, perhaps, at the time of the use or distribution of the property. There was no evidence in this case as to the bank's state of mind at either of those dates, so the claim could not succeed.

The claim in conversion

The claim in conversion arose under the Torts (Interference with Goods) Act 1977 and was based upon the refusal of the buyer's bank to return the documents of title to the goods which were the subject of the disputed consignments. That had the effect of preventing the seller from being able to assert its ownership and right to possession of the relevant goods. There was no real answer to that point and so the bank was liable for damages in conversion. However, the bank argued that the amount of damages should be reduced because the seller had failed to mitigate its loss, when it refused to accept the bank's suggestion that the goods should be sold and the proceeds of sale held in a blocked account pending determination of the seller's claim. Accordingly, the bank argued that it should not be held liable for any loss suffered by the seller which arose after the date the bank made its suggestion, such as might relate to storage costs incurred after that date and any decline in the value of the goods after that date. The bank succeeded in this argument.

The general duty to mitigate in claims for damages was laid down by Viscount Haldane in British Westinghouse Co. v. Underground Railway [1912] AC 673, at 689. It is a question of law as to whether there is a duty to mitigate in any particular case. It is a matter of fact as to whether the claimant has acted reasonably in seeking to mitigate its loss, which depends on the circumstances of the case, although the burden is not a heavy one (see Lord MacMillan in Banco do Portugal v. Waterlow [1932] AC 452, at 506).

It was held by Moore-Bick LJ that the duty on a claimant to take reasonable steps to mitigate its loss applies just as much to the tort of conversion as it does in other areas. A failure to meet the duty is not the same as would constitute contributory negligence (the latter being excluded from consideration in claims in conversion by S. 11 of the Torts (Interference with Goods) Act 1977). His Lordship said that the duty to mitigate loss in a claim in conversion is consistent with the general approach that the courts have taken in assessing the value of the relevant goods and the claim for their loss, taking into account matters such as the fact that the claimant might have managed to recover his goods, he must give credit for their value at the time of recovery and he should take reasonable steps to limit his consequential loss attendant upon being deprived of the goods. His Lordship did say, however, that it may not be reasonable to require a claimant to negotiate with a thief to purchase the return of the stolen goods, as that would be offensive to ordinary notions of morality (but it might be necessary for the claimant to pursue other lawful methods of recovery if they were available). Moore-Bick LJ said that his conclusion as to the presence of a duty upon the claimant to mitigate its loss in a claim in conversion was consistent with the general approach to the assessment of damages in a claim for conversion, as enunciated by Lord Nicholls in Kuwait Airways Corp v. Iraqi Airways Co. [2002] UKHL 19, [2002] 2 AC 883, at [67]. It also reflected what had been said by Neill and Nicholls LJJ in IBL v. Coussens [1991] 2 All ER 133.

His Lordship said that in this case, the fact that the claimant might have been obliged to accept the defendant's suggestion as to the disposal of the goods was not alleviated by the distrust that the claimant had of the defendant. They were both commercial bodies who should usually find it more realistic to take a sensible approach to resolving problems than standing on pride or principle.

Uzinterimpex JSC v. Standard Bank PLC [2008] EWCA Civ 819 (15/7/2008).

Debt ranking, payment and distribution

In a series of cases to do with the failure of so called "structured investment vehicles" in consequence of the recent turbulence in the financial markets, the courts have been faced with issues as to the ranking and payment of the claims of creditors within the same class and the distribution of assets as between such creditors, as well as the relative rights of senior and junior creditors, particularly in determining the action that should be taken in the enforcement of security. The issues arose in situations where there was an insufficiency of resources to meet the claims of all the creditors. In some of the cases, the claims of one or more creditors in a class had fallen due for payment, whilst the claims of others in the same class had not fallen due for payment. The decisions arrived at by the courts depended upon the construction of the particular documentation under which the claims arose and the assets were to be distributed, as well as the law that governed the documentation. The important point that comes out of these cases, nonetheless, is the need for clarity in setting out in the relevant documentation the rights of the various creditors and the order in which they will be entitled to payment and distribution of assets, but also bearing in mind any overriding duties, rights and obligations that may arise at general law. Two cases will now be mentioned which illustrate these matters.

In the Whistlejacket case, the issuer of various debt instruments had gone into receivership. The question arose as to whether the receivers should distribute payment to those senior creditors whose instruments had already matured due for payment, without taking into account the debt owing to other senior creditors whose instruments would mature at later dates (in circumstances where all of the relevant indebtedness had not been accelerated at the time the distribution was to be made). If each of the instruments had matured due for payment then the claims to payment under them would have ranked pari passu, as they were in the same class and would rank ahead of other creditors whose entitlement was junior to them. After looking at the payment and distribution clauses in the relevant documentation (which the court said were numerous, lengthy, complex and lacked consistency), the Court of Appeal (consisting of Lord Phillips LCJ and Jacob and Lloyd LJJ) held that the provisions only dealt with priority as between different classes of creditor and not as to priority within the same class with respect to the time when payment might be due to creditors within that class. Accordingly, the receivers were entitled to take into account repayments of debt that would fall due in the future to creditors within the same class, when deciding on the amount to be distributed from funds they held. They should not distribute the funds available simply on a first in time of maturity basis, but should take into account amounts that would fall due at a later date to creditors in the same class. This meant that if the receivers were minded to make a distribution to senior creditors whose instruments had matured, they should hold back a sufficient amount of funds so that the senior creditors holding later maturing debt in the same class would receive a distribution that was pari passu with that which had been paid out to the senior creditors holding debt that matured at an earlier date.

In the Orion Finance case, the question which arose before Floyd J in the High Court concerned whether the senior creditors holding notes issued by a structured investment vehicle (which was a Cayman Islands company) could give directions to a security trustee, contrary to the wishes of the junior creditors (for whom it also held the security), as to the time, manner and place for sale of the assets that fell within the security, the notes having fallen into default. The trustee was located in the USA and was appointed under a trust instrument governed by the law of the State of New York, with nonexclusive jurisdiction conferred upon each of the English and New York courts (the use of the English courts in resolving these types of cases, because of the speed with which the courts have been able to hear and decide the cases, has been an interesting feature in itself). The security was held as security for both types of creditor, with provisions for the senior creditors to have priority over the junior creditors in relation to the distribution of the proceeds of enforcement of the security.

The judge reviewed the provisions of the documentation but also bore in mind the mandatory requirement of the law of New York, which was reflected in a clause in the documentation, that the security trustee (as the holder of security) should act in a commercially reasonable manner in enforcing the security (see New York UCC Art. 9- 610(b)—it is not possible to contract out of this: Art. 9-602(g)). By way of incidental explanation, the position is different under English law. There is no obligation at general law upon the holder of security to exercise its rights of enforcement and it is entitled to determine the manner and order in which it will do so (see Farrer v. Farrers Ltd (1888) 40 ChD 395, China & South Sea Bank Ltd v. Tan [1990] 1 AC 536). In exercising its power of sale, however, the security holder is obliged to act in good faith (see Downsview Nomimees Ltd v. First City Corp. [1993] AC 295) and to obtain the best price reasonably obtainable in the circumstances (see Cuckmere Brick Co. Ltd v. Mutual Finance Ltd [1971] Ch 949 and Silven Properties Ltd v. Royal Bank of Scotland plc [2003] EWCA Civ 1409, [2004] 1 WLR 997. For a recent discussion of this in the context of a receivership see Bell v. Long [2008] EWHC 1273 (Ch)). See also the duty upon a legal or equitable mortgagee in the appropriation of financial collateral under Reg. 17 of the Financial Collateral Arrangements (No 2) Regs 2003 (SI 2003/3226).

His Lordship held that the senior creditors could not dictate to the security trustee how, when and where it should enforce the security, once the obligation to enforce it had arisen. In coming to that conclusion, Floyd J took into account a number of factors, including: (1) the wording in the documentation, (2) the requirement that the security trustee should act in a commercially reasonable manner, (3) the fact that the security was held for the benefit of both the senior and junior creditors and that it might be enforceable in a range of different circumstances, in some of which it might be more important to take account of the interests of the junior creditors ahead of the interests of the senior creditors, (4) that both the documentation and the law of New York required the security trustee to exercise a discretion in the way it acted and not just to act as the agent of the secured creditors, and (5) that if the security trustee complied with the directions that the senior creditors had purportedly given to it as to the time, place and manner of sale, that might force the security trustee to act in a manner which was not commercially reasonable, despite the fact that the direction itself contained a requirement that it should do so.

Having made those points, his Lordship then said that, nonetheless, the security trustee could not act in an entirely unfettered manner in the way it exercised its discretion. The junior creditors were subordinated behind the senior creditors and the documentation required the security trustee to enforce the security in a manner which was consistent with the subordination of the junior creditors' rights. It had also to bear in mind that the purpose of the security was to ensure prompt payment of the secured indebtedness represented by the notes that the mortgagor had issued and that all of the senior creditors had resolved that the security trustee should enforce the security. The security trustee should take those matters into account in exercising its discretion in deciding on the time, place and manner of sale of the secured assets.

Re Whistlejacket Capital Ltd, Kahn and ors v. The Bank of New York and ors [2008] EWCA Civ 575 (22/5/2008). Re Orion Finance Corp, The Bank of New York v. Montana Board of Investments and ors [2008] EWHC 1594 (Ch) (Floyd J 10/7/2008).

Investment products: the duty of a selling or advising bank

Gloster J in the High Court in the course of a very lengthy judgment (extending to some 740 numbered paragraphs) has considered the position of a bank in relation to a claim by its customer that the bank had mis-sold investments to the customer (which, it was accepted, was London 5040246.1 11 not a consumer or a private investor) and failed to give the customer proper advice concerning the investments. The investments were largely GKO linked notes which suffered a calamitous decline in value in consequence of the Russian economic crisis in 1998. The customer's loss was said to be in the region of US$700m. The customer put its argument against the bank on a number of bases, which included negligent breaches of an obligation to advise the customer as to the suitability of, and risks associated with, the investments (these claims arising in both contract and tort), claims for breach of fiduciary duty and claims in misrepresentation. Her Ladyship decided the case against the customer.

In relation to the alleged breach of a duty to exercise care and skill in advising the customer (whether arising in contract or in tort), Gloster J said that the position between the parties had to be assessed in the context of the relationship, which was contractual, out of which it was alleged that the duty arose. Having examined the documentation which set out and defined that relationship, she held that the parties had contracted on a basis which negated any possibility of either a general or a specific duty on the part of the bank to advise the customer with respect to the investments that it sold to the customer, even to the extent that if any advice was proffered, the contractual provisions made it clear that the customer accepted that it did not rely on such advice and that the bank would not be liable for any loss that was suffered in following the advice. Under the documentation, the customer was to be the party that made the decisions to enter into the transactions and it was solely responsible for the consequences of doing so. Her Ladyship said that this was consistent with the approach that had been taken by the Court of Appeal in Peekay Intermark Ltd v. Australia & New Zealand Banking Group Ltd [2006] EWCA Civ 386, [2006] 2 Lloyd's Rep 511 and IFE Fund SA v. Goldman Sachs International Ltd [2007] EWCA Civ 811, [2007] 2 Lloyd's Rep 449, as well as by Mance J in Bankers Trust International PLC v. PT Dharmala Sakti Sejahtera (1995) 4 Bank LR 381 and by Morison J in Valse Holdings SA v. Merrill Lynch International Bank Ltd [2004] EWHC 2471 (Comm).

There were a number of factors which supported that finding and which defeated attempts by the customer to argue that the contractual terms did not apply or should be discounted in their effect. First, the customer (and those who represented it) were experienced investors and commercial parties and London 5040246.1 12 they were of equal bargaining power with the bank. They had also consented to the customer being classified (for regulatory purposes) as a non-private investor, thereby depriving the customer of the benefit of any regulatory obligation upon the bank to ensure that the products which were sold to the customer were suitable for it's requirements, as would have been the case if the customer had been classified as a private investor. Secondly, the customer and its representatives could (and did) deal with other banks, from whom they were able to buy similar products, if they did not like the terms offered by the bank. Thirdly, the bank was not appointed to act as the customer's investment advisor. The role of the bank, as agreed in the documentation, did not include an obligation to offer advice. The relationship was really in the nature of principal to principal. Any recommendation or advice which was given by the bank (and, in particular, by one of its officers) was consistent with the role of a salesman rather than that of an advisor. Fourthly, the pattern of dealing over a long period of time was on the basis of the contractual documentation. Fifthly, the contractual documentation was not exceptional or unusual and was consistent with generally accepted documentation in the market place. The terms were clear and easily understood. Sixthly, without the documentation the bank would not have been prepared to deal with the customer. Seventhly, the customer was familiar with this type of documentation, which mirrored documentation that it had signed with other financial institutions. Eighthly, this was not a case where it was argued that there had been some active misrepresentation by the bank as to the contents of the documentation; rather, the claim was that the bank had failed to point out the risks to the customer where it was alleged that there was some anterior duty to do so.

In that context, Gloster J rejected a defence put forward by the customer, to the effect that it was not bound by confirmations made by it in the contractual documentation, by which it confirmed that in deciding upon investments it would make its own decisions and would not rely upon the bank in doing so. Such statements had the effect of raising an estoppel against the customer and prevented it from subsequently seeking to argue to the contrary of the confirmations that it had given. Such an estoppel might arise either on a contractual basis or as an estoppel by representation, and had been held to be effective in the Peekay case and in other cases such as Watford Electronics Ltd v. Sanderson CFL Ltd [2001] EWCA Civ 317, [2001] 1 All ER (Comm) 696. Her Ladyship dismissed an argument based on what was said by Diplock J (sitting in the Court of Appeal) in Lowe v. Lombark Ltd [1960] 1 All ER 611, which was intended to show that the estoppel could not work against the customer. Diplock J had said that this type of estoppel would only arise if the meaning of the relevant confirmation was clear and unambiguous, it was reasonably intended to be relied upon and it was so relied upon. Her Ladyship held that those requirements had been met in this case.

On the facts and the findings that she had made, Gloster J also rejected claims by the customer that the bank owed a fiduciary duty to the customer and that the bank was guilty of misrepresentations which had induced the customer to enter in transactions with the bank. She also held that the bank had no obligation, at the time of contracting, to draw the attention of the customer to the provisions of the contractual documentation which acted against its interest, the customer having alleged that they were particularly onerous or unusual, unreasonable or extortionate (see Bingham LJ in Interfoto Picture Library ltd v. Stiletto Visual Programmes Ltd [1989] QB 433). None of those conditions applied on the facts of the case. It was the customer's fault if it (and its representatives) were unaware of the terms, having failed to read them.

It is interesting to note that Gloster J dismissed an argument that the contractual provisions on which the bank relied might fall within the scope of the Unfair Contract Terms Act 1977 and S. 3 of the Misrepresentation Act 1967. In relation to arguments based on S. 2(2) and S. 3 of the 1977 Act, she said that the contractual provisions should not be seen as attempts by the bank to exclude or limit its liability for negligence or for a failure to meet its contractual obligations but, rather, as provisions which defined its role and the service that it rendered to the customer.
Accordingly, the customer could not complain if the loss that it suffered arose outside the limited scope of the service which the bank offered. With respect, such an approach can itself cause problems, because it might be difficult to know where the boundary lies between a legitimate prescription of the limited nature of the services that are to be provided, on the one hand, and an attempt to escape liability for negligence or failure to render adequate contractual performance on the other hand. For instance, in the contractual documentation in the present case, there were provisions by which the bank denied liability and by which it was agreed that the bank would not be liable for any loss suffered by the customer, even in cases where the bank offered advice to the customer, as well as provisions by which the customer acknowledged that position. The intended effect of such provisions must, at least in part, have been to limit or exclude a liability that might otherwise have arisen; for instance, where it might be said that the bank had voluntarily accepted responsibility in particular instances beyond the normal scope its contractual duties. Gloster J supported her view by saying that this was a contractual relationship between commercial parties of equal bargaining power who should be left free to allocate risk as they wished. It is submitted that such an approach lies more appropriately in deciding if an exclusion or limitation of liability meets the requirement of reasonableness in S. 11 of the 1977 Act (see, for instance, the Watford Electronics case), rather than in saying that there was no limitation of liability in the first place. In this regard, it is worth noting that S. 2(3) of the Act provides that, "Where a contract term or notice purports to exclude or restrict liability for negligence a person's agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk."

JP Morgan Chase Bank v. Springwell Navigation Corp. [2008] EWHC 1186 (Comm) (Gloster J 27/5/2008).

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