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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Lehman Brothers International (Europe)v Exotix Partners LLP [2019] EWHC 2380 (Ch) (09 September 2019) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2019/2380.html |
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HC-2017-001407 |
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
7 Rolls Buildings, Fetter Lane, London EC4A 1NL |
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B e f o r e :
____________________
LEHMAN BROTHERS INTERNATIONAL (EUROPE) (IN ADMINISTRATION) |
Claimant |
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- and – |
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EXOTIX PARTNERS LLP |
Defendant |
____________________
Guy Morpuss QC and Christopher Charlton (instructed by Macfarlanes LLP) for the Defendant
____________________
Crown Copyright ©
MR JUSTICE HILDYARD:
Introduction
The Parties
The documentary record of the genesis and express terms of the Trade
ISIN Description BRVALEDBS028 VALE SA CONV BOND VAR PERP US40090AAC80 GRUPO IUSACELL CELULAR 9.0 30JUN17 USPB87324BE10 REPUBLIC OF PERU 6.900% 20370812 SERIES... USP78954AA52 PETROLEUM CO OF TRINIDAD & TOBAGO LTD 6 XS0029484945 VENEZUELA GOVERNMENT CNVBND(USD VAR 15Ap USP25625AE74 CAP SA 7.375% 20360915 SERIES... REGS
(The GDNs are the third item on the list with ISIN USPB87324BE10.)
ISIN Description Notional LBIE View of Settlement Location US40090AAC80 GRUPO IUSACELL CELULAR 9.0 30JUN17 731,211 EUROMARKET XS0029484945 VENEZUELA GOVERNMENT CNVBND(USD VAR 15Ap 232,145 EUROMARKET USP78954AA52 PETROLEUM CO OF TRINIDAD & TOBAGO LTD 6 40,000 EUROMARKET USP25625AE74 CAP SA 7.375% 20360915 SERIES... REGS 30,000 EUROMARKET USY68851AK32 PETROLIAM NASIONAL BHD 7.625% 20261015 S 21,000 EUROMARKET USPB87324BE10 REPUBLIC OF PERU 6.900% 20370812 SERIES... 22,955 EUROMARKET
"we are really looking for portfolio bid otherwise we are left with all the sh*t in the end which I don't care for".
(1) Mr Hutton confirmed that he had been able to get bids for the 'Vene', but not for the other securities in the Portfolio.
(2) In respect of the GDNs, Mr Hutton explained that he believed that the market for them was "quite liquid and suggested that it would be possible to "sell them over the exchange". Mr Radicopoulos understood this to mean that LBIE could sell them direct to a retail investor. Mr Hutton admitted in cross-examination that he had only suggested that the GDNs were liquid in order to encourage LBIE to sell Exotix the Vene (which Exotix was interested in and could sell) without also requiring Exotix to buy the GDNs (which Mr Hutton regarded as obscure and illiquid).
(3) Mr Radicopoulos explained that LBIE would not be able to effect a direct sale and had hoped that LBIE could sell them to the market "through you".
(4) In response, Mr Hutton suggested that Exotix could "take [the GDNs] off your hands and take it on the books" (i.e. Exotix would buy the GDNs as principal, rather than as broker), provided that LBIE was prepared to sell the Vene through Exotix.
(5) Mr Radicopoulos asked Mr Hutton for the price at which Exotix would purchase the GDNs and he said that it would be the "bid price on Bloomberg". This referred to the market price of the securities at that time, as stated on the industry-standard Bloomberg trading platform. Bloomberg's prices are quoted on that platform as a percent of the par or notional value of the securities.
(6) Mr Hutton informed Mr Radicopoulos that the bid price on Bloomberg was around "91 and a half, 92 and a half". This meant that the GDNs were currently trading at somewhere between 91.5% and 92.5% of their "par value" (a phrase which will be addressed further below). Mr Radicopoulos' evidence is that he would have checked these figures on Bloomberg at the time to ensure that they were accurate. Mr Hutton's evidence was that the Bloomberg bid price "was roughly where we believed the market to be trading".
(7) Mr Radicopoulos then confirmed: "Ok I will do …. the Venezuela at 21 if you do Peru, if you take Peru off my hands at 91 and a half".
(8) Mr Hutton then stated that he needed to check with Mr Andrew Chappell (a Managing Director at Exotix) before he could agree to proceed on that basis.
Speaker Conversation Mr Hutton Erm and er on the er Peru we can buy the 22 just on the shy of 22..23 thousand er sol erm at 91 and a half which is around 7,712… Mr Radicopoulos Mmhm Mr Hutton …dollars, ah, and then we'll just take those on the book and I'll er, I'll work that around next week and try and, er, just hit a retail guy. Mr Radicopoulos Ok, Fantastic. Alright
"the 22 just on the shy of 22.. 23 thousand er sol erm at 91 and a half which is around 7,712… dollars".
Events subsequent to the Trade
(1) To use input "M" – "Face Amount x 1000, Price as Percent".
(2) To use input "P" – "Face Amount x 1, Price as Percent".
(3) To use input "X" – "Face Amount x 1, Price Non-Scaled".
Settlement of the Trade
"Trade Date: 31-Jan-2014
Settlement Date: 05-Feb-2014
Action: We confirm our Purchase
Quantity: USD 22,955.00
Security Description: PERU 6.9 08/12/37
ISIN: USP87324BE10
Price: 91.500000%
Total Consideration: USD 7,707.93
Euroclear Account: 12849"
Aftermath of the Trade
"I think there has been an error on this payment".
"Can you please kindly investigate the below as we do not like to have funds in the account – of such a large sum, which we believe we are not entitled to".
"not to speak to ANYONE about it".
"…The coupon received was surprising [sic] high and initially thought to be an error but further investigation indicated that although the GDN is referenced 1:1 against the underlying bond that Bond itself has a nominal value of 1,000 compared with the normal issuance of 1. This proved back the coupon receipt and it became apparent that we had acquired the asset at undervalue due to the way in which Bloomberg have entered the standing data into their system…. If these price providers are incorrect, we have received something of a windfall should the trade stand good. Conversely, should the trade subsequently be set-aside there is a material risk to the business that will grow over time in the same way as the [omitted word(s)] claim did due to both the loss of coupon income, fx differences…. To give clarity to these risks we sought external legal opinion… and from this it is clear that [omitted words]. We therefore need to recognise the gain if we consider the market to be incorrectly valuing the asset".
The Issues
(1) The first further issue arises because, on LBIE's preferred interpretation of the Trade, its obligation could only be settled by transferring 22 GDNs and (since there are no fractions of GDNs) the cash value of 0.955 GDNs to Exotix: the issue is whether, in order to give sensible effect to the Trade and enable its settlement, a term enabling that mode of settlement is to be implied on the basis of market practice and/or usage and/or business necessity. Of course, this implied term for which LBIE contends, making provision for fractional sales, is necessary to make the Trade workable only if LBIE's interpretation of the Trade's other terms is correct. But it must be adjudicated in any event because Exotix's case is that the fact that the term was not expressed and (it submits) cannot be implied tells against LBIE's overall argument on interpretation, since on Exotix's interpretation the Trade is perfectly workable without it.
(2) The second further issue arises out of LBIE's application at the end of the Trial to introduce by amendment a claim for restitution in the event that the Court finds the Trade to have been impossible to perform in accordance with its terms.
(3) The third further issue raised in the pleadings was whether it was an implied term of the Trade (implied on the basis of market practice and/or usage and/or business necessity) that, if one of the parties to the Trade identified an obvious error (i.e. an error so obvious that it cannot have coincided with the intentions of the parties), then it was obliged to correct or adjust for that error as soon as it had been picked up. Lehman provided expert evidence to that effect. However, in his oral closing, Mr Bayfield informed me that it had been agreed between the parties that, if LBIE succeeded in its primary case (including the implication of a term to provide for the delivery of 22 GDNs and a balancing payment equivalent to 0.955 GDNs), LBIE would be entitled to restitution for Exotix's unjust enrichment, with which LBIE was content. On that basis, Mr Bayfield told me that there is no need for me to adjudicate whether such a term should be implied on that point: he did not suggest it could have any legal relevance if LBIE's primary case failed.
(4) Conversely, the fourth further issue arises only if LBIE fails in its primary case. The issue then is whether there is to be implied as a term of the Trade (on the basis of market practice and/or usage and/or business necessity) that, given that coupons are not paid on a daily basis, the purchaser of the securities must pay the seller the amount of interest accrued but not yet paid as at the date of settlement (also known simply as "accrued interest")? (If so, if LBIE were to fail on its primary case, it would be entitled to the accrued interest on the 22,955 GDNs that, on that hypothesis, it sold to Exotix (less the amount already paid by Exotix in respect of accrued interest). LBIE's claim would be for $269,790 - $269.79 = $269,520.21.)
Summary of the cases of LBIE and Exotix on the issues for adjudication
Principles of interpretation and admissibility of evidence for that purpose
"When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions."
Oral evidence at Trial
Witnesses of fact
Expert witnesses
Dispute as to the admissibility of evidence in identifying the factual matrix
(a) Material agreed to be admissible and relevant
(1) As Mr Hutton asserted in his witness statement, Exotix had market knowledge of, and experience in trading, unusual assets or assets related to developing financial markets which large investment banks would not typically have. Exotix also had contacts and familiarity with the markets which could assist in pricing trades or finding counterparties willing to trade.
(2) As also stated in Mr Hutton's witness statement, LBIE and Exotix had an existing relationship. They had traded with each other previously and Mr Hutton had assisted LBIE by providing information in relation to assets with which LBIE was not familiar.
(3) LBIE was looking to Exotix to purchase a portfolio of securities which included the GDNs and other exotic securities. The portfolio consisted of the securities set out in Mr Hall's email of 29 January 2014. The securities were all bonds save the GDNs, and all were described by reference to the same criteria (face amounts/nominal values expressed in either $ or PEN.)
(4) As previously explained a GDN is a form of debt instrument issued by a depositary bank (here, Citibank) which tracks the performance of and is secured by bonds initially purchased by and deposited with the depositary bank, but which is separate from those bonds, and may be (and in the case of the GDNs in this case) is governed by a law stipulated by the issuer and may be (and in this case was to be) settled in a different currency than the underlying bonds (here, US$).
(5) In relation to the GDNs which are the subject matter of the Trade, the underlying security was a fixed-rate bond issued by the Republic of Peru in 2007 with a par value of S/1,000 paying a coupon of 6.9% per annum and with a maturity date of 12 August 2037. The GDNs were issued subject to US securities laws and are to be settled in US$.
(6) The list of securities sent by LBIE to Exotix provided a "Notional" for each of the securities. It is common ground that the term "notional":
a) does not have a fixed legal meaning across all securities: but in the case of bonds, the "notional" or "nominal" value usually refers to the aggregate sum of the par value of identical securities; and
b) is not normally used in the context of warrants but, given that they would usually be traded by reference to the quantity of units held, "notional" could refer to the quantity of securities traded.
(7) Although there is a disagreement between the experts as to whether the meaning of "notional" for bonds applies equally in the context of GDNs (Prof. Persaud says it does, Mr Kasapis says it does not), it is perfectly possible to trade GDNs with reference to their face value and price alone, as (importantly) Mr Kasapis accepted. Those are the usual parameters for the sale of a bond position, the quantity of securities being traded not being required to determine the consideration for the sale; whereas warrants and other securities are usually traded in units and by reference to quantity rather than notional, face or par value.
(8) There is no evidence that Mr Radicopoulos or Mr Hutton, in discussing the GDNs and in agreeing the Trade, treated the GDN position as needing to be traded differently from any bond position. Indeed, Mr Radicopoulos' evidence was that he thought he was trading a position in the underlying bond and, in Mr Kasapis' opinion, it appeared that Mr Hutton thought the same.
(9) The parties did not refer to the GDN Supplement and the only relevant information given about the position was that it had a notional of 22,955 and was a "scrap" position.
(10) The price was fixed by reference to, and as a percentage of, par or notional value. On the call prior to the call on which the Trade was agreed, Mr Radicopoulos had asked Mr Hutton for the price at which Exotix would purchase the GDNs and Mr Hutton had said that it would be the "bid price on Bloomberg". This referred to the market price of the securities at that time, as stated on the industry-standard Bloomberg trading platform. Both experts agreed that Bloomberg's prices are quoted as a percent of the par or notional value of the securities.
(11) The details of the GDNs provided by Bloomberg included the fact that "1 GDN = 1 Bono Soberano [sovereign bond]" and referred to a par amount of 1,000.
(12) Bloomberg offers guidance as to how to "write a ticket" and the available options include (i) an option for pricing the trade by reference to a percentage of the face notional value of the position to be traded - ("M") - typically used for bonds and other securities that trade by reference to notional value; and (ii) an option to price the trade by reference to the value per unit of the security to be traded - ("X") - typically used for securities such as shares and warrants that trade in units and where no scaling is applied to the price. In generating the Ticket, Mr Hutton selected and used Option M.
(b) Additional categories of evidence which Exotix contends is admissible
(1) First, pre-contract information known to both parties: including the matters agreed on the telephone at 16:20 on 31 January 2014, or known beforehand, but not the parties' subjective understandings of the meaning of what they had agreed, or evidence of negotiations.
(2) Second, pre-contract information known to one party, but also "reasonably available" to the other if the party with such knowledge would have shared it with the other party if asked at the time.
(3) Third, contract documents, including documents created after the contract but which (according to Exotix) were intended to record and may also supplement the agreement.
(4) Fourth, post-contract conduct, including what the parties said and did after the contract, for the purpose of identifying the subject matter of the contract, or where the contract is oral, and in particular, how the trade settled.
(5) Fifth, evidence as to the parties' subjective intentions for the confined purpose of identifying the subject matter: Exotix accepts that this is usually inadmissible, but submits that there is an exception "where there is an oral contract or to identify the subject matter of the contract" with the caveat that "it is the weakest evidence of all, being produced after the dispute has arisen, and in circumstances where none of the witnesses has any clear recollection of the trade."
(1) As to (1) in the preceding paragraph, Exotix seeks to rely as admissible and relevant on the evidence that LBIE knew, prior to the Trade, that it held (in total) 22,955 GDNs, and especially on what was referred to as "the BONY Spreadsheet". That spreadsheet was compiled before the Trade. Exotix submitted that it showed
(a) under a column marked "FO Notional", that LBIE's custodian, Bank of New York ("BONY"), held 22,955 GDNs on behalf of LBIE; and
(b) BONY had on that basis valued those GDNs at Sol 22,580,833.50 – i.e, around US$7.5 million.
That was not accepted by Mr Radicopoulos, who, though careful to stress that he had had no input into and could not speak to the document (which was compiled by LBIE's or PwC's back office), continued to maintain that in accordance with standard procedure the 22,955 figure would have represented the face or nominal value and not the number. He also stressed that he personally had no knowledge of anything but the face or nominal value of the GDNs.
(2) As to (2) in the preceding paragraph ([105]), Exotix also seeks to rely on the BONY spreadsheet as part of its case that LBIE would have shared with Exotix its knowledge of the number of GDNs it had held and wished to dispose of, and that their common intention was for LBIE to sell and Exotix to buy all those GDNs. Mr Morpuss submitted in this context that (a) it was irrelevant whether, as Mr Radicopoulos himself told me, he was not personally aware of the number of GDNs LBIE had, since the information was LBIE's and was readily available to him, and furthermore Mr Radicoploulos had agreed in oral evidence that if Mr Hutton had asked how many GDNs LBIE held, he could and would have been told; and that (b) the admissible background should encompass information that is known to one party and would have been shared with the other had they asked.
(3) As to (3) in the preceding paragraph (paragraph [105]), Exotix sought to rely on various documents produced after the Trade had been agreed, and more particularly:
(a) the Sign-Off Pack, and especially the BONY spreadsheet referred to above to which it was an attachment: this was a document setting out in summary the details of the investments proposed to be sold and terms of a proposed sale, and (i) giving performance details over a 12-month period for the investment proposed to be sold, (ii) attaching (in the spreadsheet) extracts from the records at BONY of the size of the holding and its value, and (iii) certifying PwC's approval;
(b) 'the Confirmation' of the sale of the GDNs, provided by Exotix to LBIE on 3 February 2014 (2 days before the Settlement Date) as described in paragraphs [34] and [35] above.
(4) Apart from the documentation referred to in (3) above, Exotix also sought to rely on certain post-contract conduct of LBIE, and in particular, on the instructions which it contends must have been given by LBIE to BONY (as its custodian) to transfer the holding of GDNs to Exotix in return for the agreed price of US$7,707.93, and upon what it described as the "matching instructions" which Exotix itself gave to its own custodian bank, Standard Chartered Bank, Mauritius. Exotix also sought to rely on correspondence long after the event between the parties' solicitors, in which LBIE's solicitors (in its letter before action dated 17 June 2016) described the agreement as being to "sell 22,955 Peruvian Global Depositary Notes…at a price of 91.5% of the GDN's par value".
(5) As to (5) in the preceding paragraph (paragraph [105]), Exotix sought to rely on one piece of subjective knowledge or understanding which it submitted was common to the parties: this was that "both LBIE and Exotix thought the GDNs had a par value of Sol 1", so that "to LBIE and Exotix it made no difference whether they were trading by units or by aggregate value – they were the same thing". Exotix emphasised that it did not consider any other evidence of subjective intention to be of any value to the Court.
(c) LBIE's objections as to admissibility of the above material
(1) pre-contract information known to both parties if and to the extent sought to be relied on for the purpose of introducing evidence as to the parties' subjective intentions;
(2) information known only to one but not to the other party;
(3) documents referable to the Trade but produced for in-house use after the event which were not seen, produced to or checked by the traders, nor shared with anyone at Exotix or any external party;
(4) post-contract conduct, if for the purpose of interpreting the disputed terms as opposed to identifying what such terms are;
(5) any evidence as to the parties' subjective intentions as an aid to construction of the known terms of the Trade.
(1) the LBIE Sign-Off Pack and the BONY schedule;
(2) the Confirmation;
(3) the parties' post-Trade conduct in seeking to perform their obligations under the terms of the Trade;
(4) the post-Trade correspondence between the parties' solicitors.
(d) My assessment of material admissible and relevant as part of the factual matrix
"When interpreting an agreement, the court must have regard to the words used, to the provisions of the agreement as a whole, to the surrounding circumstances insofar as they are known to both parties, and to commercial common sense." [my emphasis]
"(1) At least where there is no direct evidence as to what the parties knew and did not know, and as a corollary of the objective approach to the interpretation of contracts, the question is what knowledge a reasonable observer would have expected and believed both contracting parties to have had and each to have assumed the other to have had, at the time of their contract;
(2) that includes specialist or unusual knowledge which only parties entering into a contractual engagement of the sort in question might reasonably be assumed to have; and it also includes knowledge which it is to be inferred, from the nature of the actions they have in fact undertaken, that they had or must have had;
(3) however, it does not include information that a reasonable observer would think that the parties merely might have known: that would open the gate too far to subjective or idiosyncratic speculation;
(4) the fact that material is readily available or notorious may support an inference as to what the parties actually knew;
(5) but (subject to (6) below) where it is demonstrated that one or more of the parties did not in fact have knowledge of the matter in question such knowledge is not to be imputed; nor is the test what reasonable diligence would or might have revealed: in either case that would be inappropriately to introduce impermissible concepts of constructive notice or a duty (actionable or otherwise) to make inquiries or investigations;
(6) the exception is that a reasonable person cannot be assumed to be in ignorance of clear and well known legal principles affecting or incidental the contractual engagement in question.''
"Even in the case of a written contract, the words identifying the subject matter being bought and sold may be susceptible to more than one meaning. This is one well established category of ambiguity, so that extrinsic evidence is admissible to identify the subject matter, even on a restrictive approach to the use of extrinsic evidence in the course of contractual interpretation."
"Then it is said that there is not a sufficient description of the subject-matter of the memorandum to be found in it, the subject being "four golfing subjects." Now it is said that I cannot or that I ought not to admit parol evidence to identify those four golfing subjects, and that if I do not do that I cannot tell what particular golfing subjects were intended and referred to in the document itself. It appears to me that the cases that have been referred to shew clearly that I am entitled to receive evidence for the purpose of identifying the subject-matter of the contract. I think that both Shardlow v. Cotterell [(1881) 20 Ch. D. 90] and Plant v. Bourne [[1897] 2 Ch 281] are authorities to the effect that parol evidence to identify the subject-matter of a contract is admissible. Here I think there can be no doubt upon the construction of the memorandum itself that four particular golfing subjects are referred to, and it seems to me that the difficulty in both the cases that I have referred to which was under consideration was whether the terms of the agreement indicated that no particular property was intended, but something which might be selected by one of the parties hereafter. In one case it was twenty-four acres of land in such and such a parish, and it was said there that you could not say that that was an agreement to sell any particular twenty-four acres, and it was held that you could shew by parol evidence that a certain twenty-four acres had been marked out and that they were the subject-matter of the contract between the vendor and the purchaser. I think therefore in this case I am entitled to hear evidence as to what the four golfing subjects purchased by the plaintiffs from Mr. Thomas were. In my opinion the evidence shews that those four golfing subjects included the picture "Thirteen Down." That is the subject-matter of the present action. In my opinion, therefore, the assignment of the copyright is sufficiently shewn by the memorandum in writing signed by the proper party."
My view as to the meaning and effect of the express terms of the Trade
(1) in the recorded conversation at 16:20 during which the Trade was agreed, the subject matter is identified as "just shy of 23 thousand sol";
(2) On the face of the VCON/Ticket, the subject-matter is stated as "BUYS 22.955(M) of PERU 6.9 08/12/37."
(3) In the Confirmation, the subject-matter is stated as "Quantity: USD 22,955" (the reference to USD being obviously erroneous). Both parties contend that the prefix "USD" is incorrect: Exotix contends that there should be no such prefix at all, and that it was that number of GDNs that was the intended or true subject matter; whereas LBIE contends that "PEN" should be inserted instead, whereupon (on its case) "it would have accurately reflected the Trade''.
"Q. If they'd intended to do the trade with reference to a quantity of GDNs, a number of GDNs, then Mr Hutton wouldn't have referred to buying the just shy of 23,000 sol at 91.5, would he?
A. Reading what he said, then I would suppose not, but I'm not quite sure Mr Hutton clearly understood the underlying par amount of the GDNs of what he was trading at the time." [My emphasis.]
Does the agreement provide for and impliedly enable delivery of a fraction?
"Given that LBIE could not deliver a non-integer quantity of GDNs to Exotix, it was an implied term of the Trade, in particular (but without limitation) on the basis of market practice and/or usage and/or for reasons of business necessity, that LBIE was required to:
i. Deliver 22 GDNs to Exotix; and
ii. Pay Exotix the cash equivalent of 0.955 GDNs…"
"The question of whether a term should be implied, and if so what, `almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong…"
"to see whether the proposed implication spells out what the instrument would reasonably be understood to mean."
"The concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is a essential but not a sufficient pre-condition for inclusion."
(1) Deliver 22 GDNs to Exotix; and
(2) Pay Exotix the cash equivalent of 0.955 GDNs.
Mistake and impossibility: the pleadings and relief
"…if the contract were void for impossibility, the parties having contracted under a common misapprehension that the trade could be performed when it can't be performed, then the consequence would be that Exotix would be unable to retain its windfall, the parties would have to be restored to their pre-trade position, which is presumably why Exotix is not taking that point."
"…we have a contract on his case which is impossible to perform."
"If the Trade would have failed because of the fraction issue, then the Trade would be void for impossibility and LBIE would in any event be entitled to restitutionary relief…
…
Specifically, in the premises the Trade will be void for common mistake, on the basis of "a fundamental assumption which renders performance of the essence of the obligation impossible". See Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679."
(1) LBIE did "not wish to pursue a positive case that the Trade was void on the basis of common mistake or impossibility (or any other basis)" and the sole avowed purpose of its proposed amendment was simply to "cater for the consequence of the Court concluding, contrary to both parties' pleaded cases, that the Trade was void (whether for impossibility or otherwise) without averring that the Court should reach that conclusion" [underlining as in the submission, but with italicisation supplied by me];
(2) Exotix, in addition to its points on procedural fairness (which it elaborated with copious references to authority as to the new strictness with which the Court should treat late amendments), submitted that there is in English law "no theory of impossibility separate from mistake so as to vitiate a contract" and that in the absence of plea and proof of common mistake without fault, or frustration, there was no basis in law for the Court to treat the contract as void or unenforceable. It would be wrong now to permit a plea which, Exotix submitted, would require proof of matters not properly explored at trial and thus requiring a second trial;
(3) Exotix further submitted that LBIE's suggestion that the Court could "of its own volition" conclude that the Trade was void or unenforceable as if impossibility were to be equated with illegality was misconceived both as a matter of law and because it was wrong for a trial judge to reach a conclusion not in fact contended for by either (or any) party.
"In these cases [referring to Lord Kennedy v Panama, New Zealand and Australian Royal Mail Co Ltd (1867) LR 2 QB 580 and Smith v Hughes (1871) LR 6 QB 597], I am inclined to think that the one party is not able to supply the very thing whether goods or services that the other party contracted to take; and therefore the contract is unenforceable by the one if executory, while if executed the other can recover back money paid on the ground of failure of consideration."
"A mistake encompasses two states of mind, namely an incorrect conscious belief or an incorrect tacit assumption as to a present matter of fact or law, but does not encompass mere causative ignorance but for which the claimant would not have acted as he did."
Conclusion
"… the routine act of trying to correct, cancel or adjust for obvious errors as soon as they are picked up by one party is a trade custom"
reflects, at least, the standard of commercial behaviour usually to be expected.
Note 1 PEN being the abbreviation for the Peruvian currency, Nuevos Soles, which can also be abbreviated to “sol” or “S/”
[Back] Note 2 The parties often referred to the Venezuelan Oil Warrants as the “Vene” or the “Venezuela”. [Back]