SOCIMER INTERNATIONAL BANK LTD V STANDARD BANK LONDON LTD

[2008] EWCA Civ 116, Court of Appeal, Lord Justice Laws, Lord Justice Rix and Lord Justice Lloyd, 22 February 2008

Banking – Purchase of securities – Obligation of seller to sell assets and credit proceeds to buyer – Whether seller under implied duty of care

The claimant bank agreed to purchase securities from the defendant bank, and owed some US$24.5 million. Under the terms of the agreement the defendant as seller had to liquidate or retain a portfolio of designated assets to satisfy the amount due to it. The contact stated as follows: “The value of any Designated Assets liquidated or retained and any losses, expenses or costs arising out of the termination or the sale of the Designated Assets shall be determined on the date of termination by Seller.” The defendant did not carry out the valuation and instead sold what it could and credited the proceeds to the claimant. The issue was whether the defendant should have carried out an immediate valuation and credited the resultant amount to the claimant, or whether the defendant was obliged to credit the claimant only with what had been obtained by sales made by the defendant in its discretion. The trial judge held that the defendant was obliged to value the Designated Assets as at the date of termination of the Agreement and to bring into account the value as assessed as a credit against the amounts payable to the defendant under the agreement: the defendant was not entitled to bring into account the actual proceeds of sale of the Designated Assets. In a subsequent decision, Gloster J ruled that the defendant had been under an implied duty to take reasonable care to find the true market value. The Court of Appeal overturned Gloster J on this point and ruled that there was no basis for implying a term and also no analogy with the implied duty of care imposed on a mortgagee selling mortgaged property following default.