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BCL Law Notes Commercial Remedies BCL Notes

Uzimterimpex V. Standard Bank Notes

Updated Uzimterimpex V. Standard Bank Notes

Commercial Remedies BCL Notes

Commercial Remedies BCL

Approximately 497 pages

These are detailed case summaries (excerpts from cases - not paraphrased) I made during the Oxford BCL for the Commercial Remedies course....

The following is a more accessible plain text extract of the PDF sample above, taken from our Commercial Remedies BCL Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Uzimterimpex v. Standard Bank

Facts

The claimant, Uzinterimpex JSC (then known zas FBC Innovatsia), against the defendant, Standard Bank plc, for US$916,267.36. The claim arose out of a contract for the sale by Uzinterimpex, an Uzbek state company, to an English cotton trader, A Meredith Jones & Co Ltd, of 50,000 metric tonnes (“mt”) of cotton and the arrangements made with Standard Bank to obtain the finance needed to pay for the goods.

The contract provided that the goods were to be shipped at the rate of 8,000 mt a month between October and December 1997 and at the rate of 8,666 mt a month between January and March 1998.

Between October 1997 and September 1998 a number of parcels of cotton were delivered by Uzinterimpex at the various ports or places provided for in the sale contract. In some cases documents were tendered to the bank which conformed to the terms of the letter of credit or which the bank was willing to accept (no doubt on the instructions of AMJ) despite the fact that they did not. In such cases the bank took the steps necessary to reduce the amount of the guarantee in accordance with its terms. However, from the outset both sides experienced difficulties in performing the contract. AMJ failed to give instructions for the shipping of cotton in the amounts and at the times required and Uzinterimpex was unable or unwilling to make prompt presentation under the letter of credit of documents complying with its terms.

Bank’s refusal to discharge the goods despite release of the injunction

When the bank made its call on the guarantee it was still holding documents of title to 8,170 mt of cotton which had been presented by Uzinterimpex for payment but which did not conform to the letter of credit. The bank asked AMJ whether it was willing to accept the documents, but it declined to do so. On the same day AMJ commenced arbitration against Uzinterimpex under the auspices of the Liverpool Cotton Association seeking damages for non-delivery of part of the cotton sold under the contract. At the same time it obtained without notice an injunction restraining Uzinterimpex from dealing with any of the cotton covered by the documents of title held at the bank's counters. In fact less than a half of the cotton covered by the documents still remained in warehouse; AMJ had already managed to obtain delivery of the rest. The injunction remained in place until 17 April 2000 when it was discharged by consent following an admission by AMJ that it had sold about 5,455 mt of the cotton before the application had been made, a matter which it had entirely failed to draw to the attention of the court. However, notwithstanding the discharge of the injunction, the bank refused to release the documents on the grounds that, although the loan had by then been repaid, it was entitled to retain them as security for any further liability AMJ might have under the facility agreement, including any liability that might arise as a consequence of the claim then being made by Uzinterimpex.

Uzinterimpex’s claim in conversion

The claimant here claims damages for conversion of the cotton covered by the documents which the bank had refused to release following the discharge of the injunction.

Bank’s argument that Uzinterimpex failed to mitigate loss

In order to minimise the effect of all these the bank suggested on 9 August 2000 that the goods should be sold and the proceeds held in a blocked account to await the outcome of the dispute. However, Uzinterimpex refused to agree to that course of action, so the goods remained in warehouse for many months until it managed to procure their release by other means. By that time they had deteriorated in value and the storage costs had risen very substantially. The judge found that Uzinterimpex's refusal to agree to a sale of the cotton was unreasonable and accordingly he held that it had failed to mitigate its loss and could not recover the storage charges incurred after that date or the subsequent fall in the value of the cotton itself.

Holding

Finding by the Lower Court

The judge held that, although by refusing to release the documents of title to cotton still held in warehouses in various ports in Europe and the Middle East the bank had converted the goods, Uzinterimpex had acted unreasonably and in breach of its duty to mitigate by refusing to agree to the sale of the goods and the payment of the proceeds of sale into a joint account to abide the resolution of the dispute. He therefore held that that it was not entitled to recover damages in respect of any loss incurred after mid-September 2000 when it should have agreed to the bank's proposal.

On the facts, Uzinterimpex failed to mitigate loss – commercial context

Having rejected the documents, the bank could only hold them for Uzinterimpex's account, as the arbitrators subsequently...

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