BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Fetter Lane London, EC4A 1NL |
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B e f o r e :
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SCIPION ACTIVE TRADING FUND |
Claimant |
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- and – |
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VALLIS GROUP LIMITED (formerly VALLIS COMMODITIES LIMITED) |
Defendant |
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David Edwards QC and Nichola Warrender (instructed by DWF Law LLP) for the Defendant
Hearing dates: 20-23, 27, 29 and 30 January and 4 February 2020
Additional written closing submissions received 17 and 23 April 2020
Draft judgment circulated to parties 28 May 2020
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Crown Copyright ©
Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be 5 June 2020 2020 at 2:00 pm.
Mr Justice Henshaw:
(A) INTRODUCTION 1 (B) PROCEDURAL HISTORY 7 (C) FACTUAL BACKGROUND AND CMA TERMS 28 (1) Contractual and security arrangements 28 (2) Regular operations 38 (3) Discovery of the loss 43 (4) Subsequent events 48 (5) Mitigation steps taken by Scipion 57 (D) WITNESSES 62 (E) CAUSATION: CLAIM BASED ON POSSESSORY RIGHTS 72 (1) Authorities: claims by possessors/bailors 74 (2) Authorities: estoppel 80 (3) Application to the present case: Scipion's possessory rights 81 (a) The parties' key submissions 81 (b) Governing law 88 (c) Effect of bailment on CMA terms 92 (d) Torts (Interference with Goods) Act 1977 101 (e) Conclusion 114 (4) Application to the present case: estoppel as to Pledge validity 115 (F) CAUSATION: VALIDITY OF PLEDGE UNDER MOROCCAN LAW 123 (1) The relevant question 124 (2) Key provisions of the Pledge 127 (3) Overview of relevant provisions of Moroccan law 136 (4) Grounds on which Vallis alleges the Pledge was invalid 148 (5) Absence of list contemplated by Article 378 of the Code of Commerce 149 (a) Reference to the 1951 list 154 (b) Reference to DOC to identify products covered by Article 378 167 (c) Valid pledge under DOC? 189 (d) Conclusion on this issue 196 (6) Compliance with Article 379 requirements/Pledge over future goods 197 (7) Conclusion 215 (G) CAUSATION: CONTROL IN PRACTICE AND LOSS OF A CHANCE 216 (H) MEASURE OF LOSS 219 (1) Scipion's claims and the parties general submissions 219 (2) Date of assessment of loss/duty to mitigate 223 (3) Consequential losses and interest under the facility 233 (I) SPECIFIC ISSUES AS TO VALUATION AND MITIGATION 239 (1) Maroc Telecom scrap 247 (a) July 2018 Mac Z offer 251 (b) July 2018 Petroforce offer 254 (c) June 2019 offer 257 (d) July 2019 offer 264 (e) MTB offer 269 (f) Overall position on offers received 271 (g) Value of the remaining unstripped Maroc Telecom scrap 273 (2) Lost granules in late October 2017 294 (3) Anode sale in December 2017 297 (J) CLAUSE 8.2 EXEMPTION 302 (K) CONCLUSIONS 312
(A) INTRODUCTION
(B) PROCEDURAL HISTORY
"By reason of the Defendant's breaches of the Agreement, the balance due to the Claimant by the Borrower and/or Guarantor under the Facility, as detailed in paragraph 32(a), has been left unsecured and the Claimant has lost the benefit of the Pledge over the Goods and Products to secure performance of the Facility by the Borrower and/or Guarantor." (Re-Amended Particulars of Claim § 32(b))
"the loss of the chance to secure performance of the Facility by [Mac Z] and/or Guarantor pursuant to the Pledge of the Goods and Products held by the Defendant under the Agreement" (Re-Amended Particulars of Claim § 33)
"20. Was the Facility secured by way of pledge (or charge) prior to the registration of it in the public registry on or about 30 October 2017 and, if not, were any sums advanced under the Facility a breach of a condition precedent and/or did the Goods and Products at the Site form part of the Borrowing Base under the Facility?"
i) first report of Mr Hajji (Scipion's expert) served on 17 May 2019;ii) first report of Ms Fassi-Fihri (Vallis's expert) served on 19 June 2019;
iii) Joint Memorandum completed on 19 July 2019; and
iv) supplemental reports by Mr Hajji and Ms Fassi-Fihri served on 19 August 2019.
i) a new §5(7A) denying, for the first time, that there was a valid and enforceable pledge, due to (i) the absence of a list of products published in connection with Article 378 of the Moroccan Code of Commerce, (ii) non-compliance with requirements of Article 379 of the Code of Commerce and (iii) general principles of Moroccan law; andii) amending Defence §54(3)(c) to rely on the denial and plea of Moroccan law added at §5(7A) as a further reason (in addition to non-registration of the Pledge) for denying that "the cause of any loss of security created by any pledge and/or benefit of the pledge was any breach by the Defendant of the CMA".
(C) FACTUAL BACKGROUND AND CMA TERMS
(1) Contractual and security arrangements
"[Definitions]
'Warehouse Receipt' means a warehouse receipt to be issued by [Vallis] pursuant to Clause [5] and substantially in the format prescribed in Appendix [II]."
"[Appointment]
2.1 SCIPION hereby appoints [Vallis] as its agent for the purposes of receiving and taking into [Vallis]'s custody the Goods and Products, at the [Site], for and on behalf of SCIPION with the intent and understanding that such appointment shall be for the purposes of, amongst other things, creating a pledge, or charge (as the case may be) over the Goods and Products in favour of SCIPION…[Vallis] agrees to act as follows:
(a) to control and supervise the Goods and Products solely and exclusively in accordance with SCIPION's written instructions;
(b) to receive, store and hold the Goods and Products in the [Site] at all times subject to the sole authority and direction of SCIPION subject to the limited agency created in favour of [Vallis] by SCIPION and;
(c) to carry out the services detailed in this Agreement (including the services detailed in Appendix I).
2.2 [Mac Z] acknowledges and confirms that the Goods and Products shall be held in the name of SCIPION for the account of [Mac Z] until the end of the Security Period and until such time, [Mac Z] have no equitable or proprietary rights or interests in such Goods and Products, and such Goods and Products are held for and on behalf of SCIPION and to SCIPION's order and [Mac Z] shall not assert or create or allow to continue any security interest over all or any of the Goods and Products and [Mac Z] shall keep the Goods and Products free from any security interest or any attachment, seizure, distress, detention, arrest or other interference whatsoever, in each case other than as security for the Financing Facility.
2.3 …[Mac Z] and [Vallis] undertake at all times to immediately notify SCIPION should they know of any circumstance that may lead to the attachment, seizure, distress, detention, arrest or other interference whatsoever of or with any Goods and/or Products in the [Site]
…
2.7 [Mac Z] represents and warrants that with respect to all the Goods and Products deposited by it pursuant to the terms of this Agreement: (a) all such goods are exclusive property and it has all right, title and interest to such Goods and Products; (b) the Goods and Products are to be deposited and stored by it at the Production and Storage Facility for the purposes of creating a pledge or charge in favour of SCIPION over such goods as security for [Mac Z]'s obligations to SCIPION in connection with the Financing Facility; and (c) save and except for such pledges or charges to be created in favour of SCIPION, all such Goods and Products are free of any pledge, claim, lien, charge or demand."
"[Services]
3.1 [Vallis] undertakes to use all due care and skill in the provision and performance of its services…"
"[The Site]
…
4.2 Prior to the execution of a Lease/Sub-Lease in favour of [Vallis], [Mac Z] shall notify the location of the [Site]. Upon such notification, [Vallis] shall conduct both an external and internal inspection of the [Site] and carry out a site inspection stating whether or not the [Site] is approved by [Vallis] for the storage of the Goods and Products.
…
4.4 [Mac Z] shall ensure that [Vallis] shall have complete, exclusive and uninterrupted access to, possession and enjoyment of the [Site] during the term of [the CMA], subject at all times to the rights of SCIPION to have access to the Goods and Products under Clause [4.5] of [the CMA].
…
4.6 [Mac Z] shall be responsible for the safety, security and structural maintenance of the [Site]…[Mac Z] shall be fully responsible at all times for the management of the [Site], its staff and processes.
[Issuance of Warehouse Receipts]
5.1 [Vallis] shall receive the Goods and issue Warehouse Receipts, in the format prescribed in Appendix II hereto, to the order of SCIPION for the account of Mac Z, for Goods it has received at the [Site] on the day of arrival of the Goods at the [Site].
Vallis shall also confirm the quantity of the Goods delivered at the [Site] and in order to assess the apparent good order and condition of the Goods delivered to [Mac Z], [Vallis] shall upon delivery of such Goods weigh, visually inspect and value the Goods and promptly issue the Warehouse Receipt. The quantity and value of Goods received will be reflected in the daily report issued by [Vallis].
5.2 [Vallis] shall and issue Warehouse Receipts in the format prescribed in Appendix II hereto, to the order of SCIPION, for the account of [Mac Z], in relation to the Products it has received in the [Site].
[Vallis] shall confirm the quantity of the Products held at the [Site] and in order to assess the apparent good order and condition of the Products weigh, visually inspect, and value the Products and promptly issue the Warehouse Receipt. The quantity and value of Products held will be reflected in the daily report issued by [Vallis].
5.3 [Vallis] represents and warrants to SCIPION that the Warehouse Receipts issued by [Vallis] are issued on the basis of the quantity and value of the Goods actually received into the [Site]…
5.4 The Warehouse Receipt means a numbered and signed Warehouse Receipt described in its heading as a Warehouse Receipt in which it is stated that [Vallis] has either i) received at the [Site] a specific quantity and value of Goods as ascertained by [Vallis] upon inspection, or ii) is holding at the [Site] a specific quantity and value of Products; which Goods and Products have been received by [Vallis] for and on behalf of and to the order of SCIPION for the account of [Mac Z] in accordance with the terms of this Agreement.
…
[Release of Goods and Products]
6.1 [Vallis] shall not release or allow the release of any Goods from the [Site] unless it has received prior written instructions from SCIPION to release the Goods for further processing into Products in the [Site] in the format prescribed in Appendix VI….
[Indemnity]
7.1(b) [Vallis] shall indemnify SCIPION and keep SCIPION fully indemnified against all losses, damages, liabilities, costs (including all legal costs on a solicitors-and-clients' basis) and/or expenses of any nature whatsoever, howsoever incurred or sustained by SCIPION arising out of or in connection with any default by [Vallis] in either failing to provide the services in conformity with the provisions of [the CMA]…
[Liability of loss, damage and deterioration]
8.1 [Vallis] shall exercise all due care and skill in storing, supervising and caring for the Goods and Products and be responsible to SCIPION for the safe custody of the Goods and Products…
8.2 In the event of bulk product, there shall be an exemption of all claims for the first 3 (three) per cent of the total quantity of product held in any one warehouse at any one time and, notwithstanding any other terms in [the CMA], [Vallis] shall not be liable for any indirect or consequential damages, including damages for loss of profits, incurred by [Mac Z], whether in contract or tort.
8.3 Notwithstanding any other terms in [the CMA], [Vallis]'s total liability under, arising from or in connection with [the CMA], howsoever such liability may have been caused or arisen including a claim in tort and whether or not it is related to the Goods and/or Products, shall not exceed the cost price of the Goods and/or the Products as evidenced by the relevant purchase contracts and/or invoices, but shall include cost of freight, insurance, fees, charges, expenses and interest as advised by SCIPION.
…
[Storage of Goods]
…
9.3 Notwithstanding any other terms in [the CMA], [Vallis] shall not be liable if the quantity of Goods and/or Products lost or damaged due to unexplained reasons or unauthorized release does not exceed two (2%) per cent of the quantity of such Goods and/or Products confirmed by the relevant Warehouse Receipt, unless such liability is occasioned as a result of the wilful or negligent acts or omissions by [Vallis] or its staff. [Vallis] may dispute the existence of extent of any loss and/or any amount claimed provided that it notifies SCIPION in writing of the grounds for dispute within five (5) Business Days of any claim by SCIPION or [Mac Z].
…
[Miscellaneous]
…
17.3 In carrying out its duties [Vallis] shall exercise all reasonable care and skill and shall act faithfully on behalf of SCIPION, in particular [Vallis] shall:
(a) ensure that [Vallis only accepts into storage such consignments of Goods delivered to the [Site] from [Mac Z] which meet the requirement as stated in the Definitions under 'Goods';
[Appendix I - Services]
...
2. [Vallis] (or its agents) shall supervise the arrival of the Goods at the [Site], record the Goods, the weight and the value of the Goods upon arrival by way of weighbridge certificate subject to the terms and conditions of [the CMA] and supervise and control the Goods in the [Site].
3. [Vallis] shall provide SCIPION and [Mac Z] with a daily tonnage report for the Goods and Products held on site with a conversion estimation of the total copper product held…
5. [Vallis] shall issue Warehouse Receipts to SCIPION (in the format prescribed in Appendix II hereto) for each consignment of Goods received and inspected on the same day of their receipt, with copies of the same to be forwarded to [Mac Z]…
7. From the date [Vallis] first receives and takes delivery of Goods and Products at the [Site], [Vallis] shall submit a report (the 'Report') to SCIPION…every business day…The Report shall set out the total quantity and value of the Goods and Products held against each issued Warehouse Receipt in the [Site]…
9. [Vallis] shall ensure that the [Site] is suitable in all respects for the safekeeping and proper storage and control of the Goods and Products. [Vallis] shall further control the receipt, storage and release of Goods and Products at all times subject to and in accordance with SCIPION's instructions."
(2) Regular operations
(3) Discovery of the loss
"After having a look on stock of scrap copper located in the scrapyard, the remaining physical stock of net scrap copper can be estimated at 150 tonnes while our report shows 1970.566 tonnes which is not normal. … Investigations are in progress to know the origin of this enormous difference."
"Either the stock was removed from the Site without us knowing.
Or it was wrongly reported when it came in."
"Potential explanations for the shortage are so far limited to the following:
Scrap copper has been removed from the Mac Z site on approximately 90 trucks over the past 2 months.
Scrap copper has been processed and sold.
Weighbridge tickets presented to Vallis for the receipt of scrap copper and input to the daily reports have been falsified to inflate the amount of stock receipted into the scrapyard …"
(4) Subsequent events
(5) Mitigation steps taken by Scipion
i) Scipion served notices of Events of Default under the Facility and related guarantees on Mac Z, the Corporate Guarantor and Mr Lamdouar.ii) Scipion served a blocking notice on BMCE in relation to the Collection Accounts, which succeeded in blocking US$21,830.40.
iii) Scipion instructed Vallis to cancel immediately all releases from the Site.
iv) Scipion took steps to register the Pledge, which it achieved on 30 October 2017.
i) On 9 November 2017, Scipion issued a claim in the High Court of England and Wales (Commercial Court) against Mac Z and the Corporate Guarantor.ii) On 18 December 2017, the court entered default judgment against Mac Z and the Corporate Guarantor for the sums due to Scipion under the Facility, in an amount to be decided by the court.
iii) On 27 March 2018, the court determined that sum to be US$ 12,006,830.02, consisting of the principal amount (US$10,389,602.91), interest, late payment commission and post-default expenses plus costs assessed at £46,750.
(D) WITNESSES
(E) CAUSATION: CLAIM BASED ON POSSESSORY RIGHTS
"70. The measure of loss recoverable by a pledgee who has been deprived of the pledged goods is the full value of the goods at the date of the wrongful seizure, not merely the value of the pledgee's security interest in the goods: Swire v. Leach (1865) 18 CB (NS) 479 …, approved by Lord Collins MR in The Winkfield [1902] P 42 at 57 ….
71. This measure of loss reflects the general principle that a possessory interest in goods is sufficient to claim substantive damages for loss or damage to the goods, and the correlative principle that it is irrelevant that the claimant may have to account to a third party for some or all of the damages recovered: see The Winkfield at 54; The Jag Shakti [1986] 1 AC 337 at 345 …; The Sanix Ace [1987] 1 Lloyd's Rep. 465 at 468-469...
72. Moreover, by reason of the relationship of bailment between them on the terms of the CMA, Vallis is precluded from denying that Scipion had sufficient interest in the Goods to recover the damages claimed. In The Winson [1982] AC 939 at 959 …, Lord Diplock said that it "follows from the existence of the legal relationship of bailor and bailee as a matter of general principle of the law of bailment, which may also be described as hornbook law, that as between [the bailors and the bailees] the latter as bailees were estopped from denying the title to the goods of the former as their bailor …".
73. That general principle of the law of bailment is reinforced in the present case by the specific terms of the CMA. By Recital (A) to the CMA … it was "hereby agreed by the Parties that the requisite security in favour of SCIPION over the Goods shall be created by the delivery of the Goods into the custody of VCL who shall hold the Goods as an agent of SCIPION for the purposes of creating the requisite security in favour of SCIPION" and by clause 2.2 of the CMA … "MZG acknowledges and confirms that the Goods and Products shall be held in the name of SCIPION for the account of MZG until the end of the Security Period and until such time, MZG have no equitable or proprietary rights or interests in such Goods and Products …" (emphasis added). Those provisions amounted to an agreement that the basis for the transaction covered by the CMA was that Scipion (and not Vallis) had all equitable and proprietary rights in the Goods, which would include such security rights as would be conferred by a valid Art.378 pledge under Moroccan law. Vallis is therefore precluded from denying Scipion's claim to damages on the basis that Scipion did not in fact have such rights: see the discussion of "contractual estoppel" in Credit Suisse International v. Stichting Vestia Group [2014] EWHC 3103 (Comm) at [301]-[310] ...
74. It will not have escaped the Court's notice that there would be highly unpalatable consequences if Vallis could escape liability to Scipion on the grounds of the invalidity of the Pledge. If the Goods were lost without wrongdoing on the part of Mac Z, and Mac Z were to claim against Vallis for their loss, Vallis would be able to defend Mac Z's claim on the basis that under the CMA (and particularly clause 2.2) Mac Z had no possessory, equitable or proprietary rights to the Goods. The result would be that, even though Vallis's admitted breach of the CMA caused the loss of almost 1,900 MT of scrap copper, Vallis would not be liable to pay substantive compensation to anyone. In the words of Hobhouse J in The Sanix Ace at 471, "This reduces their argument to absurdity".
75. Scipion has measured its loss by reference to the value of the benefit which it would otherwise have had by reason of Vallis holding the Goods to its order as security for Mac Z's indebtedness under the Facility, which limits its claim to the sums to which Scipion is entitled under the Facility (and avoids the possibility of Scipion recovering from Vallis any excess over and above the sums outstanding under the Facility, for which excess it is common ground Scipion would have to account to Mac Z ). However, as Vallis itself correctly observed at para.140 of its opening skeleton, the applicable measure of loss is a matter of law for the Court. The fact that Scipion has framed its claim by reference to the Facility debt secured on the Goods to avoid an over-recovery does not mean that it is necessary for Scipion to establish the validity of the Pledge under Moroccan law to recover the sums claimed."
i) it is entitled to recover substantial damages by virtue of its possessory rights;ii) it is entitled to recover substantial damages as bailor; and
iii) Vallis is estopped by the terms of the CMA from denying that Scipion had sufficient rights in relation to the lost goods as to entitle it to recover substantial damages.
I consider the first two points together, since Scipion's claimed possessory rights derive from its position as contractual bailor.
(1) Authorities: claims by possessors/bailors
"[W]as the plaintiff entitled to recover damages to the full value of the goods seized and sold? …In distraining these goods, the defendant was an absolute wrong-doer. The landlord had no colour of right to take them. The bailee, therefore, is entitled to the full value of the goods. He may retain out of that the sums he has advanced upon them and the interest, and he will be liable to hand over the surplus to the respective owners of the goods." (p536)
Williams J similarly stated:
"As to the damages, it is clear that, as against a wrong-doer, the plaintiff was entitled to recover the full value of the goods at the time of the wrongful seizure."
Keating J agreed with both judgments.
"… the law is that in an action against a stranger for loss of goods caused by his negligence, the bailee in possession can recover the value of the goods, although he would have had a good answer to an action by the bailor for damages for the loss of the thing bailed.
It seems to me that the position, that possession is good against a wrongdoer and that the latter cannot set up the jus tertii unless he claims under it, is well established in our law, and really concludes this case against the respondents.
…
I think it can be shewn that the right of the bailee to recover cannot be rested on the ground suggested in some of the cases, namely, that he was liable over to the bailor for the loss of the goods converted or destroyed. … as between possessor and wrongdoer the presumption of law is, in the words of Lord Campbell in Jeffries v. Great Western Ry. Co., "that the person who has possession has the property." In the same case he says: "I am of opinion that the law is that a person possessed of goods as his property has a good title as against every stranger, and that one who takes them from him, having no title in himself, is a wrongdoer, and cannot defend himself by shewing that there was title in some third person, for against a wrongdoer possession is title. .. ." Therefore, it is not open to the defendant, being a wrongdoer, to inquire into the nature or limitation of the possessor's right, and unless it is competent for him to do so the question of his relation to, or liability towards, the true owner cannot come into the discussion at all; and, therefore, as between those two parties full damages have to be paid without any further inquiry." (p.55)
"… the root principle of the whole discussion is that, as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and of no other, and therefore its loss or deterioration is his loss, and to him, if he demands it, it must be recouped. His obligation to account to the bailor is really not ad rem in the discussion. It only comes in after he has carried his legal position to its logical consequence against a wrongdoer, and serves to soothe a mind disconcerted by the notion that a person who is not himself the complete owner should be entitled to receive back the full value of the chattel converted or destroyed." (p.60)
"It follows from the existence of the legal relationship of bailor and bailee as a matter of general principle of the law of bailment, which may also be described as hornbook law, that as between the cargo owner and the salvors the latter as bailees were estopped from denying the title to the goods of the former as their bailor, including as an incident of that title its right to possession…the salvors could not resist a demand for possession of the salved wheat made by the cargo owner upon its arrival at a place of safety by relying upon jus tertii, viz the shipowner's right to possession as against the cargo owner, at any rate until an adverse claim to possession had been made upon them by the shipowner." (p959G-960A)
"It has further, in their Lordships' opinion, been established, by authority of long standing, that where one person, A, who has or is entitled to have the possession of goods, is deprived of such possession by the tortious conduct of another person, B, whether such conduct consists in conversion or negligence, the proper measure in law of the damages recoverable by A from B is the full market value of the goods at the time when and the place where possession of them should have been given. For this purpose it is irrelevant whether A has the general property in the goods as the outright owner of them, or only a special property in them as pledgee, or only possession or a right to possession of them as a bailee. Furthermore the circumstance that, if A recovers the full market value of the goods from B, he may be liable to account for the whole or part of what he has recovered to a third party, C, is also irrelevant, as being res inter alios acta." (p.345)
Lord Brandon identified the only exception to this general principle as being where B has a cross-claim arising out of the same transaction which it can offset against A's claim. After citing Swire v Leach and The Winkfield, Lord Brandon continued:
"Applying the general principle laid down in Swire v. Leach, 18 C.B.N.S. 479 and The Winkfield [1902] P 42 to the present case, their Lordships reach the following result. First, the plaintiffs, as holders and endorsees for value of the bills of lading, had a right to delivery of the salt to them at Chittagong. Secondly, that right entitled the plaintiffs to recover from the shipowners, who had wrongfully converted the salt by delivering it to the buyers, the full value of the salt on delivery at Chittagong. Thirdly, the circumstance that the plaintiffs, having recovered from the shipowners the full value of the salt, might, after taking out of the sum recovered the sums expended by Atlas in financing the purchase of the salt by the buyers from the sellers, have to account, in whole or in part, for the balance to the buyers was, as between the plaintiffs and the shipowners, wholly irrelevant." (p.348)
"In contract, although nominal damages can be awarded, the right to recover substantial damages can be proved by proving possession or ownership of the relevant goods.
…
All the cases demonstrate the principle that it is the loss to the proprietary or possessory interest that is compensated, not some other or different economic loss.
…
… it was the carriers' argument that, in the present case, there is no-one who could recover substantial damages from the carriers, notwithstanding the demonstrated culpable unseaworthiness of the ship and the serious damage to the cargo which had resulted. This reduces their argument to an absurdity." (pp. 468, 469 and 470-471
(2) Authorities: estoppel
"302. The so-called principle of contractual estoppel was explained as follows by Moore-Bick LJ in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd, [2006] EWCA Civ 386 at paragraph 56:
"There is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis for the transaction, whether it be the case or not. For example, it may be desirable to settle a disagreement as to an existing state of affairs in order to establish a clear basis for the contract itself and its subsequent performance. Where parties express an agreement of that kind in a contractual document neither can subsequently deny the existence of the facts and matters upon which they have agreed, at least so far as concerns those aspects of their relationship to which the agreement was directed. The contract itself gives rise to an estoppel: …".
This has been widely accepted as an authoritative statement of the principle of law that has in recent years been dubbed "contractual estoppel", and it was endorsed by Aikens LJ in Springwell Navigation Corp v J P Morgan Chase Bank, [2010] EWCA Civ 1221 at paragraph 144. It is irrelevant that one party or both (or all) parties knew or could reasonably have discovered that the state of affairs was not as agreed. So too are any question about whether either (or any) party relied on what was agreed and any question of detriment."
(3) Application to the present case: Scipion's possessory rights
(a) The parties' key submissions
"16. Therefore, Scipion's asserted entitlement to hold any possessory interest allowing it to recover substantial damages in these proceedings is based on the existence of a bailment relationship between Scipion and Vallis. It is this and only this relationship upon which Scipion relies to assert both that (a) it holds any possessory rights giving it a right to recover substantial damages and (b) to preclude Vallis from challenging otherwise.
17. It was common ground at trial that there was a bailment relationship between Scipion and Vallis on the terms of the CMA.
18. Vallis also accepts that at common law there is a rule that a bailee is estopped from denying or disputing his bailor's title i.e. he is estopped from pleading jus tertii against his bailor.
19. Vallis submits, however, that the bailee's estoppel was abolished by section 8(1) of the Torts (Interference with Goods) Act 1977 …
…
41. In short, Vallis submits that, notwithstanding the bailment relationship which existed between itself and Scipion, it is entitled in these proceedings to show that a third party, Mac Z, has a better right than Scipion as respects all or any part of the interest claimed by Scipion or in the right of which it sues.
42. If, as is Vallis' case, the Pledge was invalid then Vallis submits that Scipion in fact held no security, proprietary or possessory rights in the copper scrap at the time of the loss with all such rights in fact remaining vested in Mac Z."
"At the common law a pledge could not be created except by a delivery of possession of the thing pledged, either actual or constructive. It involved a bailment.
If the pledgor had the actual goods in his physical possession, he could effect the pledge by actual delivery; in other cases he could give possession by some symbolic act, such as handing over the key of the store in which they were. If, however, the goods were in the custody of a third person, who held for the bailor so that in law his possession was that of the bailor, the pledge could be effected by a change of the possession of the third party, that is by an order to him from the pledgor to hold for the pledgee, the change being perfected by the third party attorning to the pledgee, that is acknowledging that he thereupon held for him; there was thus a change of possession and a constructive delivery: the goods in the hands of the third party became by this process in the possession constructively of the pledgee. …"
That analysis indicates how possession can be transferred, thus allowing a pledge to be effected, by attorning to the intended pledgee. The relevant point for present purposes is not the creation of a pledge (which is disputed) but that constructive possession can be transferred by attornment.
i) Vallis does not challenge the proposition (originally stated at paragraph 71 of Scipion's original written closing) that "a possessory interest in goods is sufficient to claim substantive damages for loss or damage to the goods, and the correlative principle that it is irrelevant that the claimant may have to account to a third party for some or all of the damages recovered" (citing The Sanix Ace).ii) It follows that it is not in dispute that a possessory interest is sufficient for Scipion to recover substantial damages for the loss of the goods, regardless of the existence of any better right of a third party to some or all of the damages.
iii) Vallis has admitted that Scipion had a possessory interest in the goods at the time when they were lost, as confirmed in my judgment on permission to amend:-
"Further, Vallis's admission in Amended Defence §12 implicitly includes an admission that Scipion had possessory rights in respect of the Goods (since there would otherwise be no bailment between Vallis, as bailee, and Scipion, as bailor)." (§ 53)iv) It is therefore not open to Vallis to contend that Scipion held no possessory rights in the Goods at the time they were lost.
v) In any event:-
a) Since the bailment was on the terms of the CMA, Scipion's claim is governed by English law (i.e. the law chosen by the parties) pursuant to Article 3 of Regulation 593/2008 on the law applicable to contractual relations (Rome I): Impala Warehousing and Logistics (Shanghai) Co Ltd v Wanxiang Resources (Singapore) Pte Ltd [2015] EWHC 811 (Comm) at § 74-81, concluding that a bailment on terms should be classified as contractual for these purposes. As noted in Scipion's written opening, neither party has sought to plead or prove a different governing law.b) Vallis accepts that it is common ground that there was a bailment relationship between Scipion and Vallis on the terms of the CMA, and does not dispute that the terms of that bailment relationship gave Scipion possessory rights in the goods.c) Vallis is in any event precluded from asserting that Scipion did not have possessory rights in the goods at the time when they were lost.Scipion also takes issue, as I discuss later, with the propositions that (1) the 1977 Act permits Vallis to plead ius tertii and (2) any jus tertii exists.
(b) Governing law
"… There is little doubt," said Devlin J., "that it is the lex situs which, as a general rule, governs the transfer of movables when effected contractually." "The proper law governing the transfer of corporeal movable property," said Diplock L.J., "is the lex situs." "The practical considerations of trade and commerce", said Moore-Bick J., "provide strong support, in my view, for the adoption of a lex situs rule in all cases". And according to Tomlinson J., the contention that the proprietary effects of dealings with a ship should today be referred to the lex loci actus, rather than the lex situs, was one which was "unlikely to be fruitful". …" (§ 24-005, footnotes omitted)
"A distinction must be drawn between the contractual effects of the transfer and its proprietary effects. The contractual effects of the transfer, like those of any other contract, depend upon the law applicable to the contract. That law will, for instance, determine whether the seller is liable to the buyer for defects in the quality of the goods. And the transfer may be invalid as a transfer but valid as an executory contract to transfer. But the proprietary effects of the transfer depend on the lex situs. That law will determine whether title passes to the transferee by mere agreement or whether delivery is necessary. If the lex situs says that no title passes to the transferee because the parties lack capacity to transfer or because of some defect of form or essential validity in the transfer, then other jurisdictions should, it is submitted, accept the fact that no title has passed, no matter what the applicable law of the transfer may say. "The contractual rights and duties of the parties can be enforced only in so far as they are consistent with the recognition of the property rights existing or created under the lex rei sitae." "A contract made in England and governed by English law for the sale of specific goods situated in Germany, although it would be effective to pass the property in the goods at the moment the contract was made if the goods were situate in England, will not have that effect if under German law … delivery of the goods was required in order to transfer property in them." (§ 24-006, footnotes omitted)
"The furthest that our courts have gone in holding that questions of title may sometimes be governed by some law other than the lex situs appears to be as follows. If an owner of chattels situated in England seeks to recover them from a bailee or a stranger, and by English domestic law his right to do so depends on his right to immediate possession, the question whether he has such a right may be held to depend on the applicable law of the contract under which the chattels were bailed to the defendant" (§ 24-005)
citing Kahler v Midland Bank [1950] A.C. 24 and Zivnostenska Banka v Frankman [1950] A.C. 57, cases concerned with exchange control regulations.
"27.. Mr. Schaff suggested that these cases could be seen as illustrating the limitations of the lex situs rule in cases where the court is concerned only with the passing of property between the immediate parties to the transaction. In particular he drew my attention to a passage in the speech of Lord Reid in Zivnostenska Banka v Frankman where he said at page 83
"there is no apparent reason why the parties should find it attractive that rights under the contract with regard to deposited property should vary according to the place where that property might be at the time; and should, so long as that property was deposited abroad, be settled by a law with which the parties were perhaps unfamiliar."
It is important to bear in mind, however, what the issues were, both in that case and in Kahler v Midland Bank . In each case the action was brought in detinue to obtain the delivery up of securities held by the bank, and as Slade J. pointed out in Winkworth v Christie , in order to succeed in such an action the claimant must establish an immediate right to possession of the goods. Property in the goods may carry with it an immediate right to possession, but not if that right has been qualified, either under a contract with a third party to whose order the goods are directly held (as in Kahler v Midland Bank), or under the contract between the claimant and the defendant (as in Zivnostenska Banka v Frankman). In such cases the contract effectively determines whether the claimant has a good possessory title (in the sense of an immediate right to possession) as against the defendant, but it has no bearing on the question of proprietary title. Neither of these cases seems to me, therefore, to provide any support for this part of the argument."
(c) Effect of bailment on CMA terms
"[Mac Z] acknowledges and confirms that the Goods and Products shall be held in the name of SCIPION for the account of [Mac Z] until the end of the Security Period and until such time, [Mac Z] have no equitable or proprietary rights or interests in such Goods and Products, and such Goods and Products are held for and on behalf of SCIPION and to SCIPION's order…"
"… does not contain any positive representation, statement or acknowledgement (even by Mac Z) that Scipion had or would have "all equitable or proprietary rights in the Goods." It records that Mac Z would have no such rights until the end of the security period but does not say in positive terms who would do so. Here it is important to bear in mind that the Goods themselves were situated in Morocco and were intended to be the subject of a valid Moroccan not English law pledge as is now accepted by Scipion. There is, however, no Moroccan law evidence before the Court as to the various forms of equitable or proprietary rights which could be held in the Goods nor (other than in relation to the pledge issue) as to what was required for the effective and valid transfer of such rights to Scipion. Vallis submits that without such evidence the Court cannot safely conclude – as Scipion's argument invites it to – that the language in clause 2.2 must mean and can only mean that Scipion would hold "all equitable and proprietary rights in the Goods.""
Further:-
"… if Scipion's construction of clause 2.2 of the CMA were correct then there would be no need for Mac Z also to have irrevocably agreed the matters set forth in subsequent provisions such as clauses 2.4 and 2.6 of the CMA. That those provisions were thought necessary by the parties is a factor against clause 2.2 of the CMA forming any part of an agreement that Scipion would hold "all equitable and proprietary rights in the Goods.""
(d) Torts (Interference with Goods) Act 1977
" 8. Competing rights to the goods
The defendant in an action for wrongful interference shall be entitled to show, in accordance with rules of court, that a third party has a better right than the plaintiff as respects all or any part of the interest claimed by the plaintiff, or in right of which he sues, and any rule of law (sometimes called jus tertii) to the contrary is abolished."
"In this Act "wrongful interference" , or "wrongful interference with goods", means —
(a) conversion of goods (also called trover),
(b) trespass to goods,
(c) negligence so far as it results in damage to goods or to an interest in goods,
(d) subject to section 2, any other tort so far as it results in damage to goods or to an interest in goods …"
The definition of "goods" includes "all chattels personal other than things in action and money".
i) As a matter of statutory interpretation, the 1977 Act was intended to apply to and govern the bailee's liability. There are explicit references to bailors and bailees in sections 2(2), 3(6), 6(4) and 12 to 16 of the Act.ii) Section 2(2) of the Act expressly provides that "an action lies in conversion for loss or destruction of goods which a bailee has allowed to happen in breach of his duty to his bailor (that is to say it lies in a case which is not otherwise conversion but would have been detinue before detinue was abolished)." This expanded definition of "conversion" (which falls within the definition of a "wrongful interference" or "wrongful interference with goods" in section 1(1) of the Act) demonstrates a clear intention on the part of Parliament to bring claims for loss or destruction of goods brought by bailors against bailees within the scope of the Act.
iii) In addition to including this expanded definition of conversion, the definition of a "wrongful interference" or "wrongful interference with goods" in section 1(1) of the Act further includes "negligence so far as it results in damage to goods or to an interest in goods" and a catch-all of "any other tort so far as it results in damage to goods or to an interest in goods." A physical loss of goods results in damage "to an interest in goods", and the breaches of duty alleged against Vallis in contract/bailment and the standard of care applicable are synonymous with a concurrent claim in negligence and/or tort.
iv) Support can be found for construing references to "tort" as encompassing claims in bailment in such cases as American Express Co v British Airways Board [1983] 1 WLR 701. The issue there was whether claims in bailment were precluded by section 29 of the Post Office Act 1969: "no proceedings in tort shall lie against the Post Office in respect of any loss or damage suffered by any person". Lloyd J held that they were:
"To my mind it would make nonsense of section 29 of the Act of 1969 to hold that the Post Office can be liable for breach of bailment. As explained by Diplock L.J. in Morris v. C. W. Martin & Sons Ltd. [1966] 1 Q.B. 716 the two most obvious duties arising out of the relationship of bailor and bailee are the duties on the part of the bailee to take reasonable care of the goods, and not to convert them. Both negligence and conversion are, of course, typical torts. The advantage to the plaintiff in laying his action in bailment is that it shifts the burden of proof. It is for the bailee to explain how the loss occurred. In that sense the plaintiff's task is easier in bailment; the defendant's more difficult. It would be a curious result if Parliament had, by section 29(1), given the Post Office full protection in negligence and conversion where, as defendant, its task is easier, but not in bailment where, for the reasons I have just mentioned, its task is more difficult."By parity of reasoning, the reference to "tort" in the 1977 Act covers bailment. It would be a curious result if Parliament had abolished the rule against raising jus tertii in claims in negligence and conversion, but not in bailment, where a defendant's task is more difficult due to the shift in the burden of proof. The fact that the 1977 Act explicitly refers to aspects of bailment makes it an even more curious a result if a claimant can avoid its operation simply by bringing the same claim in bailment rather than in tort.v) The Court of Appeal held in De Franco v Commissioner of Police of the Metropolis (unrptd, 'The Times' 8 May 1987) that the "primary object" of section 8 of the Act was to allow the third party to assert his title, but recognised that another purpose was to allow defendants properly to defend themselves. Both purposes would be thwarted if a claimant could avoid the application of the Act by electing to sue in contract/bailment rather than in tort where concurrent claims exist.
vi) There is no principled reason to draw any distinction between claims brought against tortfeasors and those brought against a party with whom a pre-existing relationship exists, be that bailment or in contract. Conversely, there is no prejudice to a claimant in construing the Act as submitted by Vallis, since if the claimant does have good title then its claim will prevail irrespective of whether its claim is brought in tort or contract/bailment.
vii) The abolition of the jus tertii rule in the context of an agent as bailee – as was the position here, since Vallis was appointed as Scipion's agent pursuant to section 2.1 of the CMA – is expressly recognised in Chitty on Contracts (33rd ed.) § 31-135:
"When agent estopped as to title31-135 An agent cannot in general dispute the title of his principal or set up the right of a third party to the property in the goods, or the documents of title to the goods, with which he is entrusted by his principal. It was formerly the law that if he was a bailee he could not (subject to exceptions) set up a better title to the goods bailed than that of his bailor (jus tertii). But this rule was abolished by s.8(1) of the Torts (Interference with Goods) Act 1977." (footnotes omitted)viii) A similar statement of principle is to be found in Clerk & Lindsell on Torts (22nd ed.) § 17-82 which, in the context of conversion, states that the common law position regarding the jus tertii rule has been "considerably changed" by the Act, which "[e]ffectively … permits the defendant to plead that a named third party has a better right than the claimant, and to have all known competing claims determined simultaneously".
ix) The suggestions in Palmer on Bailment (3rd ed.), that if a claimant elects to sue in contract or bailment then the Act does not apply, should not be followed. Palmer states (footnotes omitted):
"Section 8 applies only to actions for wrongful interference and not, for example, to actions for breach of contract. … A more controversial question arises when the defendant's wrongdoing simultaneously constitutes both a wrongful interference within s.1 of the 1977 Act and a breach of contract or bailment. It is submitted that the plaintiff can elect to sue in contract or in bailment and avoid any imperative classification of the action as one for wrongful interference." (§ 4-062)"First, s.8(1) applies only to actions for wrongful interference with goods; and this requires that the claimant sue in tort. However, … the rule in The Winkfield may also apply to actions for breach of contract. Against a claimant-possessor who sues in contract, the Act would appear to afford no authority for a plea of jus tertii whatever. It would follow that such a claimant continues to be entitled to recover damages quantified on the full value of the goods irrespective of the size of his personal liability or loss." (§ 4-144)"The first point to note about s.8 is that it applies to actions for wrongful interference – not to claims in contract or bailment or to restitution claims for recovery of money. … It has not yet been determined whether the section will apply where there are concurrent actions available in both contract/bailment and tort, although it is submitted that in such situations the section should not exclude the common law rule from claims in the former." (§ 43-051)Vallis submits that these statements are not based on any authority, reasoned justification or proper basis. Their footnotes include reference to an earlier article by Palmer published in the Modern Law Review (1978) 41 MLR 629 entitled "The Application of the Torts (Interference with Goods) Act 1977 to Actions in Bailment", but that article relies in part on dicta in Harold Stephen & Co Ltd v Post Office [1977] 1 WLR 1172, which Lloyd J in American Express Co v British Airways Board at pp.705 to 706 concluded did not support the view that the reference to 'tort' in the Post Office Act 1969 excluded claims in bailment. On the contrary, he treated it as supporting the view that such claims were covered. Further, Vallis submits, the Modern Law Review article acknowledges that claims against bailees for want of reasonable care might fall within the 1977 Act.
"It should be noted, however, that s.8 applies only to claims for wrongful interference with goods; if the bailor sues, not in tort, but in contract or for breach of the bailee's common law obligations arising from the bailment, it appears that the bailee could not avail himself of the protection of the section." (§ 31-135)
(e) Conclusion
(4) Application to the present case: estoppel as to Pledge validity
"(C) It is hereby agreed by the Parties that the requisite security in favour of SCIPION over the Goods shall be created by the delivery of the Goods into the custody of VCL, who shall hold the Goods as an agent for SCIPION for the purposes of creating the requisite security in favour of SCIPION."
"2.2 "[Mac Z] acknowledges and confirms that the Goods and Products shall be held in the name of SCIPION for the account of [Mac Z] until the end of the Security Period and until such time, [Mac Z] have no equitable or proprietary rights or interests in such Goods and Products, and such Goods and Products are held for and on behalf of SCIPION and to SCIPION's order…"
"(A) [Mac Z], pursuant to the facility agreement dated , has entered into and agree to the terms and conditions of the Copper Borrowing Base Facility (the "Financing Facility") offered and provided to [Mac Z] by SCIPION for the purpose of assisting with its commercial trade business.
(B) Pursuant to the provisions of the various transaction documents entered into by, among others, SCIPION with [Mac Z], the Financing Facility is to be secured by way of pledges over the Goods and Products or their equivalent, which in the case of Goods are to be purchased by [Mac Z] from the various domestic suppliers of copper scrap; and in the case of Products, to be sold to Eligible Buyers."
(F) CAUSATION: VALIDITY OF PLEDGE UNDER MOROCCAN LAW
(1) The relevant question
"By reason of the Defendant's breaches of the Agreement, the balance due to the Claimant by the Borrower and/or Guarantor under the Facility, as detailed in Paragraph 32(a), has been left unsecured and the Claimant has lost the benefit of the Pledge over the Goods and Products to secure performance of the Facility by the Borrower and/or Guarantor." (Re-Amended Particulars of Claim § 32(b))
"the loss of the chance to secure performance of the Facility by [Mac Z] and/or Guarantor pursuant to the Pledge of the Goods and Products held by the Defendant under the Agreement" (Re-Amended Particulars of Claim § 33)
(2) Key provisions of the Pledge
"(A) Pursuant to a facility agreement dated on or around the date of this Agreement entered into between the Secured Party as lender, and the Pledgor as borrower (the "Facility Agreement") to fund the purchase by the Pledgor of the Goods for processing into Products, the Secured Party has agreed to make available to the Borrower an uncommitted Dollar revolving copper borrowing base facility in a maximum total amount of USD 10,000,000 on the terms and conditions set out in the Facility Agreement and for the purposes therein mentioned (notably regarding the duration and the interest rate applicable to the Facility).
(B) As security for the due performance of the Secured Obligations (as defined below), the Pledgor has agreed, according to Clause 4.1 of the Facility Agreement, to grant to the Secured Party a Pledge over Goods and Products "convention de nantissement de marchandise" pursuant to the terms of this Agreement (as defined below).
(C) In this context, the Parties have agreed to enter into this Pledge over Goods and Products the "Agreement", subject to the provisions of Articles 378 et seq. of Dahir n°1 96-83 dated August 1, 1996 portant promulgation de la toi n° 15-95 formant code de commerce "(Commerce Code").]"
"…
"Collateral" means the Pledged Assets and the Pledged Documents".
…
"Finance Documents" has the meaning ascribed to such term in the Facility Agreement.
"Goods" means copper scrap.
"Products" means copper products including wires, tubes and billets, whether finished or unfinished.
…
"Pledge" means the Pledge created over the Collateral pursuant to this Agreement, in compliance with articles 378 et seq. of the Commerce Code.
"Pledged Assets" means the Goods, Work in Progress and the Products, whether current or future, owned by the Pledgor and Pledged under this Agreement in favor of the Secured Party, the list of which is specified in Schedule 1 'List of Pledged Goods and Products'.
…
"Secured Obligations" means present and future liabilities (whether in respect of any payment or performance of the Obligors under or in connection with the Finance Documents)."
"2.1 Constitution of the PledgeAs security for the full repayment, discharge and performance of the Secured Obligations, and in compliance with articles 378 et seq. of the Commerce Code, the Pledgor hereby grants in favour of the Secured Party, a first ranking Pledge over the Collateral, including any Goods and/or Products which may be substituted to any other Goods and/or Products after the date hereof.2.2 Nature of the Collateral
The nature of the Collateral is described in Schedule 1 (List of Pledged Goods and Products).2.3 Quantity of the Collateral
The quantity of the Collateral is described in Schedule 1 (List of Pledged Goods and Products).2.4 Value of the Collateral
The value of the Collateral held under the relevant Warehouse Receipts shall, at any time so long as the Agreement or the Pledge is in force, combined with the cash balance held on the Local Collection Accounts and subject to the Pledge over Bank Accounts, be equal to or not less than one hundred and twenty five percent (125%) of the aggregate amount of outstanding Advances under the Facility, being the Borrowing Base Coverage Ratio tested by delivery by the Pledgor of the weekly Borrowing Base Report.If the ratio outlined in the paragraph above is not met, the Pledgor undertakes before the next test date to either i) Pledge additional Goods and/or Products ii) pay an additional amount into the relevant Local Collection Account or iii) prepay an Advance, to ensure that the ratio is preserved by the next weekly Borrowing Base Report.2.5 Designation of a Third Party Consignee
The Secured Party expressly entrusts the Collateral Manager with the custody of the Collateral. A Collateral Management Agreement dated on or about the date of this Agreement has been entered into between the Secured Party and the Collateral Manager, to this purpose.2.6 Storage of the Collateral
The Collateral shall be stored at the Mac Z Facilities.2.7 Insurance over the Collateral
The Collateral is insured with (insert name of the insurance company). The details of the Insurance Policy are provided in Schedule 2 (Insurance Policy).In case of damage to the Collateral, the Secured Party shall be subrogated in any rights, action and privilege of the Pledgor with regards to any insurance indemnity related to the Collateral pursuant to the Insurance Policy, without an express delegation being necessary, and may, in case of a continuing Enforcement Event, directly perceive the amount of such indemnities within the limit of the Secured Obligations.2.8 Exclusivity of the Pledge
It is expressly agreed that the Pledgor shall not create or permit the existence of any security interest in the Collateral, with the exception of the Pledge created hereby.2.9 Rights under the Pledge
The Secured Party will benefit, at any time, all the rights and prerogatives, which it is entitled to under Morocco law, under this Pledge, and may exercise such rights and powers, including obtaining of the amounts due by the Pledge under the Secured Obligations."
"The Pledgor will promptly, at its own cost, do all such acts or execute all such documents as the Agent may specify (and in such form as the Agent may require):
3.1 to perfect the Pledge created or intended to be created under or evidenced by this Agreement;
3.2 for the exercise of any rights, powers and remedies of the Secured Party provided by pursuant to the Facility Agreement or by law; and
3.3 to facilitate the enforcement of the Pledge;
without such operation constituting in any manner a novation of the rights or security granted under this Agreement.
The Pledgor shall take all such actions reasonably requested by the Agent (including making all filings and registrations) necessary for the purpose of the creation, perfection, protection or maintenance of the Pledge conferred or intended to be conferred on the Agent by or pursuant to this Agreement."
"This Agreement shall be registered as first ranking on the specific register held before the Secretariat-greffe of the Commerce Court, pursuant to article 381 of the Commerce Code.
Upon expiry of the first period corresponding to the legal validity period of the Pledge and so long as any Secured Obligation is continuing, the Pledgor shall renew, in favour of the Secured Party, at its costs and expenses, the registration of the Pledge for a new legal validity period in compliance with article 384 of the Commerce Code.
The Agent may, as the case may be, implement, at the costs and expenses of the Pledgor, any formalities, (including renewing the registration provided for in this Article 7) which may be necessary or useful to oppose the Pledge to third parties.
All powers of attorney in view of registering the Pledge pursuant to this Article 7 or renewing such registration are given to that purpose to any holder of an original copy of the Agreement."
"Goods
- Copper scrap
- Copper products including wires, tubes and billets, whether finished or unfinished
Quantity
For as long as any amount is outstanding under the Finance Documents or the Facility is in force, the Borrower shall procure that the total aggregate value of the Goods and Products held under the relevant Warehouse Receipts as valued at the LME Copper Cash Buyer Price multiplied by the Inventory Percentage is equal to or not less than one hundred and twenty five per cent (125%) of the aggregate amount of outstanding Advances under the Facility."
"A deed constituting the Pledge of goods was filed on 30/10/2017 under the no. 81 in favour of Scipion Active Trading Fund Srl and Scipion Capital (UK) Ltd for the sum of 10,000,000 American dollars.
Situation: Subject to control [Sous réserve de controle]"
(3) Overview of relevant provisions of Moroccan law
"Unfortunately, jurisprudence (and its study) is not as developed in Morocco as it is, for instance, in Europe. Relatively complex pieces of legislation were introduced in Morocco at the beginning of the 20th century during the French protectorate and most of the legislation regarding security interests did not change until the end of such century, or even until April 2019. Therefore, there is almost no authority or doctoral analysis available to us. Moreover, case law is not abundant as the development of complex business transactions is quite recent and remains limited in a developing country like Morocco. Furthermore, it is difficult to access such case law as it is generally not published and because there is no centralized (a fortiori, computerized) database of the same, not even a general index of the different decisions. In this respect, it is worth noting that the largest database, privately compiled, accounts for only 8,000 decisions (covering all fields of the law, from family law to criminal law, from public law to torts), with only a few of the decisions being commented on by scholars. This lack of access to case law is partly explainable because Morocco is a civil law country where case law (court rulings or decisions) are not as important as they are in common law countries as, from a purely legal stand point, they do not bear any authority outside the case on which they rule but have a mere influence on future cases tried (the higher the hierarchy of the court, the more influential the decision). Finally, in Morocco, practitioners rely more on the letter of the law than on decisions from courts (that are not particularly reliable in Morocco), with the exception of the Supreme Court, especially in matters relating to security interests as the provisions of the law are usually straightforward and precise.
"Article 2: It is ruled in commercial matters in accordance with the laws, customs and business customs, or civil law insofar as it does not contradict the basic principles of commercial law."
"Article 336: There are two kinds of pledges: a pledge that supposes the debtor's dispossession and a pledge that is without dispossession."
The French text reads:
"Il y a deux sortes de nantissement: le gage qui suppose la dépossession du débiteur et le nantissement sans dépossession."
Thus as in the DOC, the term gage is used to denote a pledge with dispossession.
"Article 337: The pledge constituted either by a trader, or by a non-trader as a commercial act, is governed by the general provisions of Articles 1184 to 1230 of the dahir of 9 ramadan 1331 (12 August 1913) forming the code of obligations and contracts and the special provisions of the first section below.
The commercial pledge may take the special form of deposit in the general warehouse, which is subject to the provisions of Section II below."
"The products and materials indicated on a list drawn up by the authority may be Pledged by their owner under the conditions given in the present Chapter, not involving possession by the creditor."
(4) Grounds on which Vallis alleges the Pledge was invalid
i) the absence of the list contemplated by Article 378 means that no valid pledge can be created under Articles 378 ff;ii) in any event, the Pledge did not comply with the mandatory requirements of Article 379, therefore could not be a pledge "under the conditions given in the present Chapter" within Article 378;
iii) the fact that the Pledge was subsequently registered is not determinative of, or evidence of, its validity; and
iv) if the Pledge is not valid under Article 378 then it is invalid: it cannot be upheld on any other basis.
Point (iii) above was common ground between the experts and it is not necessary to address it further.
(5) Absence of list contemplated by Article 378 of the Code of Commerce
i) Article 378 is only one of a number of mechanisms under Moroccan law for granting a pledge. As Mr Hajji accepted, there are a number of other provisions, dealing with specific assets and with ongoing businesses generally, e.g., the pledge over general business assets ("du fond de commerce") under Article 106 of the Commercial Code;ii) the evidence of Ms Fassi-Fihri, accepted by Mr Hajji, was that pledges under Article 378 are rare for reasons that include the legal uncertainty created by the absence of the required list (the onerous requirements of Article 379 being another): thus the court is not being asked to decide that a widely-used provision of the Commercial Code is in fact unusable; and
iii) although the April 2019 Code is not before the Court, it appears that at least some of the difficulties that arose under Article 378 have been addressed by this new Code: so any problems with Article 378 are to a degree historic.
"Q. My question to you was simply: the court would try to make their intention effective, wouldn't it?
A. I think so. And their intention was to enter into a valid 378 pledge, you are right. But there is a reason for that. The reason is that the pledge covered by article 378 gives a protection to the parties. The conditions are very strict, whether on the matters that are covered by this pledge or in the identification of the nature, the quantity and, you know, all those are legal requirements.
The fact that the parties want to enter into a pledge covered and governed by those provisions rather than doing common law pledge governed by DOC articles, this is the intention of the parties. This is my opinion."
i) to treat the 1951 list as applicable, orii) to fill the gap by referring to the general provisions of the DOC, in particular the provision in DOC Article 1174:
"Everything that may be validly sold may be subject to a pledge.Nevertheless, the pledging of a future, random object or an object which is not in our possession is considered valid; however, this pledge only confers on the creditor the right to demand delivery of the objects subject to the contract, as soon as this delivery can be made." (a) Reference to the 1951 list
25. That being said , in practice, the argument of the absence of effectiveness of the law may be convincing and, in order to render the law effective (the provisions of Articles 378 et seq.) one may want to refer to the 1951 list, even if the same was repealed in 1996.
26. As to whether that argument would be accepted if it were tested, unfortunately, to the best of my knowledge, no case law has yet specifically addressed this issue and no arguments were made before the relevant Moroccan court in this respect when the pledge governed by Articles 378 et seq., and referred to in the judgment quoted in Mr. Hajji's report … was discussed."
"Order of the director of finance dated 20 July 1951 relating to the enforcement of the Dahir of 20 March 1951 governing the pledge of certain products and materials
THE DIRECTOR OF FINANCES, …
Having regard to the Dahir of 20 March governing the pledge of certain products and materials and notably its first article.
ORDERS:
SOLE Article. – The provisions of the aforementioned Dahir of 20 March 1951 shall apply to loans granted on the products and materials indicated below
Raw sugar;
Tin plate;
Cellulose pulp;
Raw bovine hides;
Raw cotton, cotton yarn;
Wool in bulk and woollen yarns;
Raw jute;
Hemp;
Raw and yarn fibranne and rayon;
Seeds, oleaginous fruits and crude vegetal oils;
Cocoa;
Alfa;
Mining products;
Petroleum products and lubricants;
Steel products and non-ferrous metals;
Raw rubber;
Plasticisers;
Refractory soil;
Canned fish or fruit."
"However, Article 381 of the Commercial Code did not institute any penalty for the failure to register the mortgage in the special register prepared for that purpose at the clerk's office of the court in whose jurisdiction the mortgaged products and materials are located. Indeed, the failure to register or define [sic: typo: renew] the mortgage in the special register results in the mortgage creditor losing its priority status among creditors. When explaining its decision, the court stated that: "While this case pertains to a mortgage on products without a transfer of possession, the file contains no evidence indicating that this mortgage was registered in the special register prepared for that purpose at the court in accordance with the provisions of Article 381 of the Commercial Code. Having said that, the Legislation did not institute any penalty for violating these requirements... In addition, the failure to make or renew this registration does not cause the creditor to lose its status as a mortgage creditor. This is because these procedures guarantee the mortgage creditor a priority status among the rest of the creditors." Based thereupon, Chapter 381 of the Code of Obligations and Contracts was applied correctly, and the legal effect of the failure to register the mortgage contract in the register prepared for that purpose is nothing more that the mortgage creditor's loss of its priority status among the creditors, all the while continuing to retain its capacity as a mortgage creditor. Accordingly, the decision is sufficiently justified and well-founded, and it has not violated the legal requirements it is alleged to have violated. Consequently, this argument must be disregarded."
"If the evidence of the expert witness as to the effect of the sources quoted by him is uncontradicted, "it has been repeatedly said that the court should be reluctant to reject it," and it has been held that where each party's expert witness agrees on the meaning and effect of the foreign law, the court is not entitled to reject such agreed evidence, at least on the basis of its own research into foreign law. But while the court will normally accept such evidence it will not do so if it is "obviously false," "obscure," "extravagant," lacking in obvious "objectivity and impartiality", or "patently absurd," or if "he never applied his mind to the real point of law", or if "the matters stated by [the expert] did not support his conclusion according to any stated or implied process of reasoning"; or if the relevant foreign court would not employ the reasoning of the expert even if it agreed with the conclusion." (footnote omitted)
"In our judgment the following extracts from the notes in Dicey accurately set out the relevant aspects of English law in regard to the proof of a foreign law:-
1. An English Court will not conduct its own researches into foreign law – see Di Sora v. Phillips (1863) 10 HLC 624 per Lord Chelmsford at 640:-
"It seems, however, rather questionable whether the Judge has a right to resort to the foreign law itself for information when the evidence of the witnesses is not satisfactory to his mind. The witnesses are at liberty to adduce, in support or confirmation of their testimony, text books, decisions of foreign courts, or rather authorities, which, becoming a part of their evidence, may enable the Judge to form his own opinion upon the particular text of foreign law thus laid before him. But it seems contrary to the nature of the proof required in these cases, that the Judge should be at liberty to search for himself into the sources of knowledge from which the witnesses have drawn, and produce for himself the fact which is required to be proved as a part of the case before him. As my noble and learned friend, Lord Brougham, said in the Sussex Peerage Case (11 Clark and F.115) "the judge has not organs to know and to deal with the text of the foreign law, and therefore requires the assistance of a lawyer who knows how to interpret it'."
2. If the evidence of expert witnesses conflicts as to the effect of the foreign sources, the court is entitled, and indeed bound, to look at those sources in order itself to decide between the conflicting testimony. See Earl Nelson v. Lord Bridport (supra) per Lord Langdale M.R. at page 537:-
"Such I conceive to be the general rule; but the cases to which it is applicable admit of great variety. Though a knowledge of foreign law is not to be imputed to the judge, you may impute to him such a knowledge of the general art of reasoning as will enable him, with the assistance of the Bar, to discover where fallacies are probably concealed, and in what cases he ought to require testimony more or less strict. If the utmost strictness were required in every case, justice might often have to stand still; and I am not disposed to say, that there may not be cases, in which the Judge may, without impropriety, take upon himself to construe the words of a foreign law, and determine their application to the case in question, especially, if there should be a variance or want of clearness in the testimony."
This was the approach made by Scarman J. (as he then was) to a mass of conflicting expert evidence on German private international law in The Estate of Fuld (decd) (No.3) [1968] P.675 at pages 700-703."
"49. Reasonable as that approach might be in the eyes of an English lawyer, there was no evidence to support it. It was contradicted by the evidence of Mr Alissa [the defendant's expert]: whose view was that the change had been introduced to meet the case where the employment relation was terminated prior to the contractual term of the contract. And, as the judge recognised (at paragraph [81] of his judgment) Professor Amkhan [the claimant's expert] gave no direct evidence on the point. His view, which the judge did not accept, was that, on the facts, the contractual term had continued throughout the period of ex gratia payments: (transcript, 16 December 2008, pages 117–121, 124). On the question what meaning should be given to the phrase "work relation" in article 222(1), he went no further than to confirm (as article 4 of the Law provided in terms) that Labour Law "had to be interpreted and implemented in accordance with Shari'ah law." That, he said, meant that the term had to be interpreted with regard to the facts of the case.
50. In the absence of evidence that recognised principles of interpretation under Shari'ah law would require an extended meaning to be given to the phrase "work relation" in article 222(1), the judge, in effect, decided for himself what Shari'ah law would require. In that respect – as it seems to me - he went beyond what he could properly do under the guidance given by this Court in Bumper Development Corporation Limited v Commissioner of Police for the Metropolis [1991] 1 WLR 1362, 1368D-1371D. He purported to construe foreign legislation by applying principles of interpretation which had not been established by evidence."
(b) Reference to DOC to identify products covered by Article 378
"… the provisions of the … DOC, specifically the provisions of Articles 1170 et seq. relating to the ordinary pledge can be supplementary in certain conditions with the "commercial" pledge when the special law being the Code of Commerce is unclear or silent in certain points of law …" (Joint Memorandum § 11)
"… Articles 1170 et seq. of the DOC, and in particular Articles 1174 et seq. of the DOC are applicable to the Pledge Agreement …" (Joint Memorandum § 13)
"The legislator … affirmed in [Code of Commerce Article 2] that civil law applies to commercial matters where there is no contradiction." (2nd report § 6.6)
"6.7. Based on the above, the Moroccan law (DOC with effect from August 12, 1913 and the code of Commerce with effect from October 3, 1996) recognises only two type of pledges:
(1) Commercial pledges without dispossession of the pledgor with two different modes: (i) the pledge over tools and equipment ("Nantissement de l'outillage et du material d'èquipement") from Article 355 to 377 of the Code of Commerce … and (ii) the pledge over certain products and materials ("nantissement de certains produits et matières") from Article 378 et seq of the Code of Commerce …. In addition, Articles 1170 to 1183 of DOC are the general principles applicable to a pledge and are therefore applicable to commercial pledges without dispossession of the pledger, provided they do not also contradict the specific Code of Commerce provisions detailed above.
(2) Commercial pledges with dispossession of the pledgor (Articles 337-354 of the Code of Commerce … and in addition, Articles 1184 – 1240 of DOC … are applicable to this form of pledge (as those provisions specifically apply to the "gage" i.e. a pledge with dispossession), again on the basis they do not contradict the specific Code of Commerce provisions detailed above.
6.8. As such and in both types of pledge, the provisions of DOC (the Moroccan civil law) are applicable insofar as those provisions do not contradict the specific provisions in the Code of Commerce (the Moroccan special law). More generally, where a Moroccan special law (as is the Code of Commerce) is silent or unclear on a matter of law, such discrepancies are resolved by referring to the "droit commun" (i.e. the civil law, which in this case is DOC). DOC regulates general principles of contract (in Articles 1 – 478) and also "named contracts" (in Articles 479 – 1250), and these "named contracts" include the pledge contract."
(2nd report §§ 6.7 and 6.8)
"… in reference to Moroccan law reasoning, when a special law as the Code of Commerce is lacking of any clear provision, it is necessary to refer to the common reference law which is DOC."
(2nd report § 8.1)
"9.1. SFF considers that the absence of a list referred to in Article 378 of the Code of Commerce means that any pledge granted pursuant to that Article is invalid (Joint Memorandum, paragraph 14). I do not agree. SFF's analysis would lead to an absurd result or it would render Moroccan law ineffective.
9.2. The reasoning to follow in order to respond to an issue which is not regulated by the special law (i.e. the Code of Commerce) is to search whether the civil law (i.e. DOC) addresses precisely or through a general principle such an issue.
9.3. The objective analysis in respect this issue by which effectively the 1951 list of products has been repealed by the Code of Commerce is to read and refer to Article 2 of the Code of Commerce and Article 1174 of the DOC. Those two aforesaid articles from the Code of Commerce and DOC are totally complementary and not contradictory. They provide for the legal solution to a simple administrative default in providing for a list of goods and products being wrongly viewed by SFF as a legal issue with the consequence of the invalidity of the Pledge.
9.4. It is important to note that the 1951 list no longer applies, but the goods and products may nevertheless be validly pledged under Article 378 of the Commerce Code because Article 1174 of DOC provides that anything that can be validly sold can be pledged. Therefore, in the absence of a list, any goods or products may be subject to a pledge under Article 378 of the Commercial Code. I should point out that the title of Article 378 is named "Le Nantissement de certains produits et matières" (which translates as "the pledge of certain products and materials") and also that Articles 386, 388 refer to the wording "marchandises" which means that there is no limited reference to products and materials knowing that the word "marchandise" is large and it may refer to any kind of goods which could be construed as being commercially dealt with."
"Q. ... Now, you have not, Mr Hajji, identified any judicial case or any textbook authority for that opinion, have you, in your report?
A. No, sir, but I always refer to the principle of Moroccan law which is the same as the French law, is that when the special law, as the commercial law is missing or is not fully -- I mean fully detailed in respect, the implementation of a form of contract has been pledged over goods and products, one necessarily has to go to the reference law, the DOC, which is called le droit commun, the common law in Moroccan law."
"A. … To me, the reference to 1174 of the DOC reflects of a lawyer, any lawyer in Morocco, when a special law is missing any details with respect, the implementation of the same special law, one necessarily refers to the general principle of law which are contained in the DOC."
"Q. Therefore if the Commercial Code requires that in order to qualify under article 378, the product or material must appear on a list, then that specific requirement must be complied with, does it not? You can't look back to some general provision --
A. In Morocco, it is our reflex. When we do not find a solution for one point…"
"A. It is our normal resolute in Morocco as I told you. When we do not have a response under the law, what do we do? We just break and we do nothing, or we try to find out what is the reference law saying, or providing, in respect one question which has no answer within this special law, as the Commercial Code."
"The pledge constituted whether by a trader, or by a non-trader as a commercial act, is governed by the general provisions of Articles 1184 to 1230 of the dahir of … 12 August 1913 forming the code of obligations and contracts and the special provisions of the first section below. …"
"Under Moroccan law, there is a general distinction between "non-professionals" (to which the D.O.C. only applies) and "professionals" (to which both the D.O.C. and the Code of Commerce apply, the provisions of the Code of Commerce superseding the provisions of the D.O.C. having the same purpose: see above paragraph 12). In the case at hand, as the parties acted as professionals, the Code of Commerce is applicable and, in the absence of provisions of the Code of Commerce, the D.O.C. is applicable. I assume that that is the reason why the parties intended to implement a pledge governed by the Code of Commerce (Article 378 et seq.) and not the DOC."
"Q. … You can see in article 2 the reference to civil law which we agreed encompasses the DOC. Article 2 doesn't say that civil law applies only where it is expressly referred to in the Commercial Code; it says that civil law applies insofar as it does not contradict the basic principles?
A. Exactly. So when they complement the Commercial Code, they can be applied. But when they deal with the same topics, they cannot apply because they contradict the Commercial Code. When the Commercial Code says that the pledge over certain materials and projects -- projects and materials are valid only with a list, you cannot go to the DOC and say: oh no, the pledge can be given over any materials. That is what I am saying. It is a contradiction."
"Q. So there is only one principle in play here, not two, because before we had contradiction and a necessity to cross-refer, but I think you are agreeing with me now that really it just all boils down to the absence of contradiction?
A. Okay, I agree with you."
"7.1. In respect of the Pledge, it is clearly referred in the preamble (c) that "the Parties have agreed to enter into this Pledge over Goods and Products ("the "Agreement") subject to the provisions of Articles 378 et seq of Dahir n° 1-96-83 dated August 1, 1996 ("Commerce Code")", meaning that the Pledge is a pledge without dispossession (see paragraph 6.8(1) above) regulated by the aforesaid Code of Commerce provisions and also Articles 1170 - 1183 of DOC (subject to any contradiction).
7.2. It is absolutely clear that, under the Pledge, the Goods and Products were with the possession of MAC Z Group (as specified in Article 5.1 of the Pledge) and Vallis was designated to take into custody the Goods and Products, for and on behalf of Scipion (as defined in Article 2 of the Collateral Management Agreement of July 13, 2016 (the "CMA")."
(§§ 7.1 and 7.2)
"Nevertheless, the pledging of a future, random object or an object which is not in our possession is considered valid; however, this pledge only confers on the creditor the right to demand delivery of the objects subject to the contract, as soon as this delivery can be made."
[1] "Q. Am I right, Mr Hajji, that article 378 that we see there is only one of two exceptions in Moroccan law to the principle that pledges over movables must involve dispossessing the pledgor. The first exception is the pledge over tools and equipment and the second exception is in article 378, the pledge of certain products and materials.
A. Yes, there are two."
[2] "Q. As we discussed a moment ago, article 378 is one of two exceptions to the principle that pledges over movable, tangible assets are to be made by dispossessing the pledgor; we agreed that a moment ago?
A. Correct."
[3] "Q. But I think we agree, Mr Hajji, that the references to nantissement or gage in the 1913 DOC, dealt with in articles 1170 and then in the second chapter, 1184 and following, they are concerned with pledges with dispossession?
A. Absolutely.
Q. And the pledge without dispossession, those two exceptions we talked about, were first given effect in the 1951 dahir?
A. Yes.
Q. And until the very recent law, were contained in the 1996 code?
A. Yes. But please, just one exception: the DOC civil law or Moroccan law provided for slightly -- but not in details -- about the pledge without dispossession.
Q. Is that right? Let's look first of all, if we may, at articles 1184. ...
Can we look first of all at article 1188? And I think we can see in article 1182, it provides that the pledge is complete by the effective handover of the object subject thereto.
So in the French, "par la remise effective de la chose qui en est l'objet au pouvoir". That is talking about a pledge with dispossession.
A. Yes, sir.
Q. And indeed, if we look on in this section to article 1204, …, we can see that article 1204 provides that the creditor must ensure the care and conservation of objects and the rights with which it is pledged.
A. Exact.
Q. And that is consistent with possession being transferred from the pledgor to the pledgee or to the creditor. So again, it is dealing with a pledge with dispossession, do you agree?
A. I agree.
Q. And if we look back at the general provisions, so the section starting from article 1070 --
MR JUSTICE HENSHAW: 1170?
MR EDWARDS: 1170 is the first article under these general provisions, can we look at article 1174 please.
This is the article that you have referred to. And we can see that it says: "Everything that may be validly sold may be subject to a pledge."
But it goes on to say:
"Nevertheless, the pledging of a future random object or an object which is not in our possession is considered valid. However, this pledge only confers on the creditor the right to demand delivery of the objects subject to the contract as soon as this delivery can be made."
So that article itself connotes that it is dealing with a pledge with dispossession?
A. Yes.
Q. And as I think we agreed a little while ago, under the 1913 DOC, the only type of pledge that existed at that time was a pledge with dispossession. The exceptions only came in later in 1951. Is that correct?
A. Yes. But if you read paragraph 2 of 1174, it refers to the concept of non-possession: nevertheless the pledging of a future random object, of an object which is not in our possession is considered valid.
The non-possession concept was at that time considered as entering within the concept of the pledge with the possession, but this is an exception.
Q. But you need to read, don't you, Mr Hajji, the rest of the paragraph because it goes on to say:
"However, this pledge only confers on the creditor the right to demand delivery of the object."
So it confers on the creditor a contractual right to ask for delivery of the goods which were being pledged, and the pledge will come into existence when the delivery is being made, and it is a pledge therefore with dispossession?
A. My understanding is that the pledge would be valid even though the -- I mean, the pledge enters into force at the time the parties agree for the pledge over goods which are not yet available, delivered to the creditor.
Q. If you are right, then the general provisions in title 11, chapter 1, are going rather further than what we see in chapter 2, because chapter 2, you have agreed, is concerned with pledges with dispossession; pledges over movables.
To be clear, what I am suggesting to you is that in 1913, before the two exceptions created by the 1951 dahir, the only type of pledge recognised under Moroccan law was a pledge with dispossession?
A. Exact.
MR COLLETT: That puts two propositions in one question, my Lord. I am not sure. Maybe that …
MR EDWARDS: I think my learned friend will have an opportunity to re-examine. I have been putting these questions as fairly as I can."
i) Article 1170 refers to a pledge being created when the debtor "allocates" ("affecte") a tangible or intangible object as guarantee for an obligation, and confers on the creditor to take ownership of it if the debtor fails to comply, thus stopping short of requiring actual delivery;ii) Article 1177 provides that any pledgor does not lose the right to dispose of the object;
iii) Article 1179 provides that the pledgor "can do nothing that reduces the value of the object"; and
iv) Article 1183 makes provision for loss or damage caused by the debtor;
all of which provisions are at least consistent with a pledge not necessarily requiring dispossession of the pledgor.
"Q. As we discussed a moment ago, article 378 is one of two exceptions to the principle that pledges over movable, tangible assets are to be made by dispossessing the pledgor; we agreed that a moment ago?
A. Correct.
Q. Do you agree that as it is an exception, it is appropriate to interpret article 378 strictly?
A. I would say yes. Yes, I confirm."
(c) Valid pledge under DOC?
i) DOC Title 11 Chapter 1 sets out the general principles applicable to a pledge, and applies to commercial pledges provided there is no contradiction with specific Code of Commerce provisions (see § 167 above).
ii) I have already concluded that Article 1174 (see § 153.ii) above), in particular, is capable of applying to a pledge without dispossession (see §§ 180-184 above), even on the footing that the present Pledge did not involve dispossession (see §§ 177-179 above).
iii) To uphold the Pledge under the DOC would be consistent with the general approach of the Moroccan courts described by Mr Hajji, as indicated in § 169 above, and would avoid (in Ms Fassi-Fihri's words) "the absence of effectiveness of the law" (§ 155 above).
iv) Applying Article 2 of the Code of Commerce (see §§ 142 and 173-175 above), there would be no inconsistency between upholding the Pledge and Articles 378 ff of the Code of Commerce in circumstances where the latter articles had in substance not been brought into effect because there was no list identifying the types of goods to which they applied.
"MR JUSTICE HENSHAW: Just before you leave that topic, are you saying that where parties have entered into a pledge, or tried to enter into a pledge, referring to article 378 and following, and if those articles simply don't apply because there is no list, that the pledge cannot take effect as a common law pledge under the DOC?
A. Yes, my Lord.
MR JUSTICE HENSHAW: Is that conclusion based on the legislation, or is that based on your interpretation of the parties' intention?
A. This is my interpretation of article 2 of the DOC … What I am saying is that the parties have decided to enter into a pledge agreement governed by articles 378 which provides that a list must be -- you know, that the pledge must be granted over products, you know, listed in a list.
The fact that there is no list and we have the DOC apply for exactly the same topic, for me that means that there is a contradiction. The DOC says that we can enter into a pledge agreement over any products that can be sold. And the Commercial Court says that we have to give -- grant a pledge over materials listed in our list.
So for me, there is a contradiction on those two articles, and it is too easy to save an invalid pledge, where it was the intention of the parties to be covered and protected by this pledge, to say: okay, it is invalid in Commercial Code, let's ignore the articles 378 and have the DOC applied. This is dangerous, my Lord, because that means that when the parties want to be protected by certain provisions that are strict, we can then save it and have it apply with other provisions that are, in my view and my opinion, contradictory to the Commercial Code.
MR JUSTICE HENSHAW: Thank you. If there is no list, how do we know whether any particular pledge would have fallen within article 378 or not?
A. Sorry, I cannot understand --
MR JUSTICE HENSHAW: If there is no list that tells you which types of goods article 378 applies to, then how do we know whether any given pledge, such as this pledge, is one that would have been subject to those provisions.
A. This is a very good question, my Lord. This is exactly a question that I questioned myself.
There is the intention of the parties, a will of the parties to enter into a 378 pledge, probably based on a previous list, because it was non-ferrous metals, but their intention was to enter into this pledge because it is a pledge that gives protection. And with very strict conditions on nature, quantity, and the fact -- and because the previous -- I mean, certain products and materials that are supposed to be precious or with high value, and the parties wanted to enter into this agreement to receive the protection of that pledge. That is what I am saying.
If you are going and -- and pretend that the pledge can be saved by the DOC agreement, then the parties do not receive the same protection.
This is one thing, and the second thing, all the DOC provisions which apply to pledges are only applied to pledges with the possession. So it is very difficult to save the pledge with other articles that cover pledges with different nature.
MR JUSTICE HENSHAW: Thank you."
"The function of the expert witness in relation to the interpretation of foreign statutes must be contrasted with his function in relation to the construction of foreign documents. In the former case, the expert tells the court what the statute means, explaining his opinion, if necessary, by reference to foreign rules of construction. In the latter case, the expert merely proves the foreign rules of construction, and the court itself, in light of these rules, determines the meaning of the documents" (emphasis added).
and, more generally, to Dicey § 9-015:
"An English court will not conduct its own researches into foreign law; in the common law system, "the trial is not an inquisition into the content of relevant foreign law any more than it is an inquisition into other factual issues that the parties tender for decision by the court". But if an expert witness refers to foreign statutes, decisions or books, the court is entitled to look at them as part of his evidence. But the court is not entitled to go beyond this: thus if a witness cites a passage from a foreign law-book he does not put the whole book in evidence since he does not necessarily regard the whole book as accurate. Similarly, if the witness cites a section from a foreign code or a passage from a foreign decision the court will not look at other sections of the code or at other parts of the decision without the aid of the witness, since they may have been abrogated by subsequent legislation." (footnotes omitted)
(d) Conclusion on this issue
(6) Compliance with Article 379 requirements/Pledge over future goods
"Article 379: The pledge must be recorded in a formally authenticated document or a private document that specifies that the Parties wish to be placed under the system of the provisions laid down in the present Chapter.
This document must indicate the family name, the first name, the status and the domicile of the lender and the borrower, the amount and the term of the loan, the interest rate agreed, the nature, quality, quantity and value of the products that are to be used as security for the loan, a precise indication of the place where the security is located, together with the name and address of the insurer with which the product pledged is insured, if this is the case.
The borrower must indicate in the document any pre-existing pledge over the same products and materials."
[1] "Q. If we look at the second paragraph of article 379,
I think we can see it says:
"This document must indicate [a number of things]."
And you would accept, Mr Hajji, that the use of the word "must" indicates that the requirements that we see there are mandatory. They have to be complied with?
A. Yes."
[2] "Q. Well, Mr Hajji, surely the parties can agree what they like, but they can't change Moroccan law, can they?
A. No, no, of course. The law is the law.
Q. Exactly. And the requirements of article 379 are the requirements of article 379, and they must be complied with. You agree?
A. I agree. I agree with you, okay."
[3] "Q. … Let me be more precise: they can't create a pledge which is valid under article 378 without complying with the mandatory requirements of article 379. Do you agree?
A. I do not agree again, because again, when the law is restrictive, it doesn't mean that you cannot do except but the law. The law is there, and you have to comply with it. When the law with some -- with respect some situation or an object which is difficult to implement, the parties can agree for this. It is their commitment and they agree for this. If someone is not happy or he doesn't agree with this, and even though he agreed for this, he cannot come after with the court and say: this contract or this pledge is not valid because it is a contradiction with the law. It is something which is not in Moroccan system. We cannot be -- it is kind of principle of estoppel. We cannot say something and agree for something and after say it is our right to challenge or contest something we agreed upon."
[4] "A. …There are some requirements which are not met, I agree with you, but -- I mean, requirements about the quantity, the quantity of the goods, the requirements about the list, the requirements about the special register we have not yet discussed --
Q. So they are all not met?
A. They are not met, but this does not mean that the pledge is not valid. This is my reading and my reasoning in respect of the Moroccan law."
"The value of the Collateral held under the relevant Warehouse Receipts shall, at any time so long as the Agreement or the Pledge is in force, combined with the cash balance held on the Local Collection Accounts and subject to the Pledge over Bank Accounts, be equal to or not less than one hundred and twenty five per cent (125%) of the aggregate amount of outstanding Advances under the Facility, being the Borrowing Base Coverage Ratio tested by delivery by the Pledge of the weekly Borrowing Base Report.
If the ratio outlined in the paragraph above is not met, the Pledgor undertakes before the next test date to either i) pledge additional Goods and/or Products ii) pay an additional amount into the Local Collection Account or iii) prepay an Advance, to ensure that the ratio is preserved by the next weekly Borrowing Base Report."
Schedule 1 to the Pledge is quoted in § 134 above.
"Facilitation of the constitution of movable securities:
The draft law harmonised and simplified the rules applied to the regime of movable securities without dispossession (the pledge) enabling debtors to grant movable securities over all their assets, including those that are useful to their activity …"
and explained that the new law:
i) "instruments ["consacre"] the option to pledge future things". The court interpreter translated "consacre" as meaning 'dedicates', 'allocates' or 'attributes';
ii) "opens the possibility" of constituting a movable security over receivables "where the amount is not yet determined or which could change over time";
iii) "introduces a regime of pledge over circulating assets";
iv) "instruments the option to describe the objects encumbered generally, so as to enable a pledge to be constituted over a set of assets, present and future without the parties having to list the assets encumbered"; and
v) "recognises a general right of the parties to substitute one asset pledged for another, without this substitution giving rise to a new security".
(7) Conclusion
(G) CAUSATION: CONTROL IN PRACTICE AND LOSS OF A CHANCE
i) The goods held by Vallis to Scipion's order were at all times, and remain, available to Scipion to secure sums outstanding under the Facility pursuant to the terms of the CMA. Moreover, at all times since October 2017, Scipion has exercised control, and a right of disposal, of the remaining goods, the majority of which have been sold to Mac Z (who have never challenged Scipion's rights over those goods).ii) Scipion has pleaded an alternative claim for damages for loss of the chance to secure performance of the facility, as pleaded in the Re-Amended Particulars of Claim §33. As it is a matter of speculation whether Mac Z would ever have taken the validity points which Ms Fassi-Fihri has raised, there would have been a high chance that Scipion could have relied upon the Pledge successfully.
(H) MEASURE OF LOSS
(1) Scipion's claims and the parties general submissions
i) The outstanding balance under the Facility of US$12,006,830.20, plus costs of £46,750, and statutory interest thereon which it has calculated at US$ 1,677,509.50 up to 20 January 2020. These sums, expressed in US$, total US$13,750,729.86. Scipion on 27 March 2018 obtained a judgment in this court against Mac Z and the Corporate Guarantor for the sum of US$12,006,830.20, comprising outstanding principal of US$10,389,602.91 plus interest (US$1,095,543.42), late payment commission (US$161,094.67) and post-default expenses (US$360,589.20), plus costs of £46,750;
ii) less credits for:
a) US$ 578,572.88 for the recoveries it has in fact made from the sales of goods and products since the copper scrap was lost;
b) US$ 877,826 for the value of the goods and products remaining at the CMA Site as at 4th December 2019; and
c) US$ 21,830.40 frozen in the pledged bank accounts;
iii) plus US$ 214,131.12 in collateral management fees and US$ 19,806.29 in travel and accommodation expenses.
i) Its loss is prima facie to be measured by the value of the lost goods.ii) However, the parties' copper valuation experts agreed that the market value of the total goods and products that Vallis warranted that it was holding at the Site on 9 October 2017 was either US$ 15,162,981 (Vallis's expert) or US$ 13,540,972 (Scipion's expert). Both amounts exceed the amount outstanding under the Facility both as at 31 October 2017 (US$11,397,929.13) and under the judgment of 27 March 2018 (US$12,006,830.20).
iii) Accordingly, in order to avoid any need to account to Mac Z for a surplus, Scipion limits its claim to the amount due under the Facility, less credits but plus consequential losses, i.e. the calculation outlined in § 219 above.
i) Swire v Leach establishes that the measure of loss recoverable by a pledgee (irrespective of the amount the pledge is intended to secure) is to be calculated at the market value of the pledged goods, subject only to any pleaded recoverable consequential losses.ii) The same applies to a claim founded on a possessory interest. Cases such as The Winkfield [1902] P 42, 54 per Collins MR and The Jag Shakti [1986] 1 AC 337, 348H establish that to compensate the holder of a possessory interest, the proper measure in law of the damages recoverable is the full value of the goods. As Hobhouse J stated in The Sanix Ace at p.469 "it is the loss to the proprietary or possessory interest that is compensated, not some other or different economic loss." The position is no different if the claim is brought in contract or bailment as opposed to in conversion.
iii) The value of the lost goods as at the date of breach was US$10,464,820.80.
iv) No relevant consequential losses exist here. Scipion has pleaded only two heads of consequential loss here, and cannot now plead or advance any others:
a) collateral management fees paid to Vallis up to the date of termination of the CMA, and to Ace Global Depository thereafter, to control, hold, supervise and store the remaining goods at the Site pending sale, amounting in total to US$214,131.12; andb) travel and accommodation expenses of US$19,806.29 incurred by Scipion employees to oversee and secure actual and potential sales of the remaining goods.However, such costs of preserving and realising the value of the remaining security do not flow from Vallis's breach. The collateral management fees would have been incurred whether or not there had been any breach by Vallis. The expenses were not consequential upon Vallis's breach or the loss of goods but upon Scipion investigating or selling goods that were unaffected by the breach.v) Swire v Leach also indicates that the measure of loss is calculated by reference to the market value as at the date of the physical loss or seizure, which must have occurred by 9 October 2017 in this case, and not any later date.
(2) Date of assessment of loss/duty to mitigate
i) The normal rule is that damages should be assessed at the time of the breach of contract: see MacGregor On Damages (20th ed.) § 26-096:
"The general rule is that damages for breach of contract should be assessed as at the date when the cause of action arose, viz the date of the breach."
ii) The position is no different for losses in relation to property: see MacGregor § 20-002:
"Where damages are awarded for a loss in relation to property, the normal measure is based on the market value of the property at the time of the wrong, whether tort or breach of contract."
iii) The appropriate date for the assessment of damage is 9 October 2017. The precise date of breach in this case is unknown but it must have been by no later than that date, when the loss of copper scrap was ascertained.
iv) The general rule is not absolute, and the court has the power not to follow it if by doing so it would give rise to injustice.
v) In the present case the normal rule should apply. The value of Scipion's security interests in the goods was always subject to fluctuations in the LME price. That price risk was inherent in the type of security taken and existed irrespective of any breach by Vallis. Vallis was responsible for the care of the goods, and it is liable because as a result of its breach the copper scrap was lost, but it is not responsible for price risk during the time it took Scipion to sell the remaining goods.
vi) The LME price for a valuation as at 9 October 2017 was US$ 6,639 per mt. It has not exceeded that price since the end of June 2018. As at 20 January 2020 it was US$ 6,276.50, and by 29 January 2020 it had fallen to US$ 5,698. Scipion has not adduced any evidence to show that it would have sold the lost copper scrap at a time when the LME price was higher than USD 6,639. Evidence would be required to support any allegation that Scipion has lost any opportunity to sell at a higher value: see MacGregor § 20-003; Industria Azucarera Nacional SA v Empresa Exportado de Azucar [1982] Com LR 171. Such an argument would be hopeless on the facts in any event, given that Scipion has not even yet sold all the remaining goods.
i) Scipion undertook an inevitable price risk in relation to the security for which Vallis is not responsible: see § 223.v) above;
ii) Scipion has been able to sell any of the goods that remained at the Site at any time both before and after 9 October 2017, and their value was unaffected by any breach on the part of Vallis;
iii) if these goods are assessed at a date which is different from the valuation date for the lost goods then the resulting calculation is unlikely to reflect the true 'net loss' to Scipion which was caused by Vallis's breach;
iv) in particular, if any credits for the values of the remaining goods at the Site are assessed after the end of June 2018 then the practical effect of this will be to hold Vallis liable for a fall in the LME price;
v) a date of assessment of 9 October 2017 eliminates the risk that any subsequent events unrelated to Vallis's breach, which have occurred in the intervening 27 month period, are built into Scipion's calculation of loss, such as :-
a) fluctuations in the LME price;
b) a loss of granules in October 2017, when Mac Z carried out its threat of procuring the removal of a further quantity of copper granules from the Site on 28 October 2017 without authorisation. Scipion tracked the removed granules to the Port of Casablanca but did not manage to receive any of the sale proceeds, amounting to some US$ 700,000, from Mac Z. Scipion brings no claim against Vallis for this, but because these granules were neither sold nor remain at the Site, then the effect of Scipion's approach to calculating credit would be to hold Vallis responsible for this loss;
c) the failure of Scipion to insist on receiving full payment for certain anodes sold to Petroforce in December 2017: 107.784 mt of anodes sold on 9 December 2017 had a value as at that date of US$ 667,665.29, but Scipion gives credit only for US$ 533,000 (a shortfall of US$ 134,665.29), Scipion having apparently allowed Mac Z to retain the difference;
d) any subsequent failures to obtain market value on any of four later sales to Mac Z; and
e) Scipion's failure to mitigate its loss (see further section (I) below). If the remaining goods are valued as at 9 October 2017, then questions of mitigation of loss do not arise.
i) The primary measure of Scipion's loss is the value of the lost goods.
ii) It is common ground that those goods are to be valued as at 9 October 2017, the accepted or assumed date of breach.
iii) Remaining goods that have been sold should be valued at the dates on which, and in the amounts for which, they have been sold unless Vallis shows Scipion has failed to mitigate its loss by delaying sale or otherwise failing to recover a proper value for the goods.
iv) Remaining goods that have not been sold should be valued as at the date of trial unless Vallis shows Scipion has failed to mitigate its loss by delaying sale.
(3) Consequential losses and interest under the facility
(I) SPECIFIC ISSUES AS TO VALUATION AND MITIGATION
"[Vallis] shall indemnify SCIPION and keep SCIPION fully indemnified against all losses, damages, liabilities, costs (including all legal costs on a solicitors-and-clients' basis) and/or expenses of any nature whatsoever, howsoever incurred or sustained by SCIPION arising out of or in connection with any default by [Vallis] in either failing to provide the services in conformity with the provisions of [the CMA]…"
"… as a result of or arising out of or in connection with the performance or non-performance of the Contract"
(1) Maroc Telecom scrap
i) in July 2018, by Mac Z itself;ii) in July 2018, by Mr Cohen on behalf of Petroforce;
iii) in June 2019, by SV Overseas;
iv) in July 2019, by another third party; and
v) on an unknown date, by MTB.
I consider these in turn.
(a) July 2018 Mac Z offer
i) it indicates that Scipion did not consider this at the time to be an offer which could not be improved upon; and
ii) it evidences the level at which offers for unstripped Maroc Telecom cable from processors within the domestic market of Morocco could be achieved as at that time. It also has the benefit of being made by the very processor who was familiar with the quality and the costs/time of stripping and also knew that Scipion would want to rid itself of the stock. It thus provides a realistic sense-check of the parties' valuation expert evidence because this offer takes into account all the same factors that they have had to in forming their opinions on valuation.
(b) July 2018 Petroforce offer
(c) June 2019 offer
- "Here is what we came up with, subject to our (Scipion) confirmation
- He will take all we've got, steel and copper not removed, at LME – 1600
- A trial container of 25 MT to be dispatched as soon as possible to the Philippines including the 384 kilos of wire with steel content stripped out, which is all we have on hand. Once Andreas has confirmed, we can finalize a contract
- 10/20% down payment for the trial container, balance upon arrival in Manila, against documents remitted on a DC basis"
"The cost of preparing (stripping) the cable for transit however would involve another 10-20% deduction, so that total offer is approximately US $3,840 per mt, equating to an offer of approximately US $75,000 to US $100,000."
and, with reference to both this proposal and the July 2019 proposal discussed below, added:
"Neither of these sales has yet been advanced any further on the basis that [Scipion] hopes to receive a better price."
"A. … We were very excited when we saw this. In fact, this was an introduction to Scipion by myself so I was more excited than most, actually, but they were good enough to actually go out to Morocco and send a technical person out from China, actually, to go and inspect the site and look at the quality.
But once they did that, the inevitable horse trading began, and it became very clear that they had quality issues with the stock, they were expecting Scipion to -- well, their hope was that Scipion would finance the acquisition of the stock by themselves, which of course was not appealing to us. They expected Scipion to bear the cost of delivery of the stock, so freight and insurance and whatever the processing, ie bagging costs etc that would be incurred. Scipion to bear all that cost all the way to the Philippines which is a known risky jurisdiction, with a balloon payment of 95% of the price on delivery in the Philippines.
…
The processing costs will be higher because we require the cooperation of Mac Z/Adnane Lamdouar to procure an export permit for this material, which is not assured because there is a restriction on export of unprocessed Maroc Telecom because of environmental issues. I think this whole discussion is a completely moot point. I think unless the telecom is processed, stripped, granulated in country, you will not get it out of the country. I think it is a completely moot point.
So these discussions -- and they were nothing more than discussions, they were not a firm offer, they were an indicative offer -- with this Intramex crowd would have inevitably fallen over.
…
So my position, not as a commercial person, but as someone who distils information from commercial people in my team, is that this offer was fantasy. It would never have arrived. We would no doubt have sold this stock in the Philippines and run the very grave risk that the stock goes missing and we receive 5%, and I would be sitting here today, having this discussion, saying: why have we been so neglectful with valuable stock that could have been sold for a better price, for the money, and to reduce the loss of your client."
(d) July 2019 offer
"Q. And that would -- when you take into account transport, that would get you $864,000-odd?
A. Yes, it looks good on its face, but it faces the same problems, sir, because this is delivery at Lyon, so we would have all the costs of delivery at Lyon, and all the risks associated with that.
Q. You have taken into account transport cost of $3,000 per truck. So that is taken into account.
A. I am sure there will be other transport costs, sir, and then there will be insurance. And then there will be -- I do not recall the balloon payment was as severe on this one, but it was still payment on delivery.
Again, it is a completely moot point because unprocessed Maroc Telecom cannot be exported"
"A. I think what you see in my witness statement is that we have tried to mitigate the position by my second trip to Morocco in April --
Q. April which year?
A. 2018. I went along to see His Excellency Thomas Reilly, the UK ambassador to Morocco, to explain the predicament that we have.
Q. Just pausing there, April 2018 would be what, that is almost 20 months ago?
A. Absolutely. He is a busy guy so we don't get a regular audience, but we put it on his radar that we have this difficulty of getting this stock, which is very low-grade stock that requires a lot of processing, out of the country to try to monetise it. We explained the difficulty and it was, you know, we have done what we can to get around the legal regime that exists in Morocco."
(e) MTB offer
"Again difficulties no doubt with the quality of the Maroc Telecom; difficulties exporting; difficulties, if not impossibility, of exporting the Maroc Telecom; and the rest, I cannot really shed any light on other than I am sure this would have been just a talking point. It would have been a negotiating point"
(f) Overall position on offers received
(g) Value of the remaining unstripped Maroc Telecom scrap
"The Maroc Telecom Cable stock is sold domestically and is valued at a lower percentage of 30% of the LME price. This is because the stock is not homogenous, the cables are very difficult to strip and the stock is mixed with iron and other hazardous materials. Maroc Telecom Cable stock is not exported so I have only provided the domestic value in this report."
"The Maroc telecom stock is not homogenous. The cables are mixed with aluminium and steel which makes more difficult the process to stripped them. I understand that the best quality cables from the initial stock were already stripped and consumed and the worst quality is what is remaining in the current stock.
Scipion has sent me two offers they have received for those cables. These offers of $885 per MT and LME minus 1500 or 1600 are in line with my estimations.
Miss Lesley Campbell is correctly benchmarking the price of this type of cable to the prices for similar quality in USA. However I don't think that prices in USA can apply to prices in Moroccan Market. In the local Market, as well as the offers Scipion has received, I have made confidential enquiries which confirm the prices are in line with my value estimation.
I also noticed that in order to be exported this material needs an export licence which is not easy to obtain.
From the offers Scipion has received and my confidential enquiries, the cargo appears to be perceived in the Market as a distress cargo, so it has a further discount. Plus there is also the freight cost, finance cost, logistic costs, and cost of Insurance to be included in order to export this material (assuming it can be exported."
i) He did not take account of the fact that Scipion and Mac Z had themselves priced the scrap, for the purpose of their own records under the CMA, as 88% of LME price on a copper content of 35.9%, equating overall to 31.6% of the LME copper price.ii) As mentioned earlier, Mr Cohen stated at first (in examination in chief) that his soft bid for the scrap had been for the domestic market, but later denied saying that and stated that it had been for export.
iii) He disclosed in his report that he had purchased copper anodes and granules from Mac Z, but not that they were part of the CMA stock that he was being asked, as an expert, to value. His response was that he "did not think it was useful to mention these details", having disclosed that he had a commercial relationship with Mac Z, and it was "a very small world where everybody knows everybody".
iv) In answer to the question whether Mr Cohen was asked to help Scipion on a number of occasions, he replied that "we had some communication, and we discussed the case on an off-the-record basis because we have a relationship, and we had in the past a commercial relationship, and I have a certain knowledge of the Moroccan market"; but then immediately appeared to contradict himself by stating that he had never discussed the case with Scipion.
v) When explaining his 30% estimate of processing costs, Mr Cohen said in cross-examination:
"the 30% takes into account the potential loss because you can be in a situation where, for example, you have in this case 400 tonnes of copper, but when you process it you have losses in the process. When you melt that copper, you put this copper on the furnace, you make 3, 5, 6% losses and that has to be included in the 30% which is the processing cost."
Mr Cohen accepted that he made no mention of this point in his report.
i) she was not in a position to say whether Mr Cohen was wrong about the difficulty in exporting unstripped Maroc Telecom cable from Morocco;ii) it is likely that a processor of Maroc Telecom cable in Morocco would be reliant on manual labour, bearing in mind that a new granulating machine might well cost US$1.25 million, but she was not able to help with the cost of manual labour to do the processing in Morocco;
iii) the domestic market in Morocco is very limited, and that she was not in a position to add to Mr Cohen's evidence that there are only three recyclers in Morocco (one of which is Mac Z) and that the market in Morocco is very different from the large and mature recycling market in the UK or Spain;
iv) the unstripped Maroc Telecom cable was a distressed cargo, and this would depress the price;
v) she had included pricing data for various unstripped cable in the exhibit to her supplemental report and had calculated the relative LME prices, which came out at an average of 12.9%, indicating that some of the prices for unstripped cable relative to the LME price can quite easily be in the range of 12% of the LME. However, this data was, Ms Campbell said, not representative of all cables that are traded, nor of the highest or the lowest, but a random sample that she took in order to help her to understand and to put in context the data that she had on the Maroc Telecom cable. She did not have enough information about the particular types of cable included in that list to be able to assume they were either similar to or dissimilar from the Maroc Telecom cable; and
vi) in the light of the foregoing considerations and having regard to her limited knowledge of the Moroccan market she could not say that Mr Cohen's 30% of 35.9% (i.e. 10.8%) valuation was outside the reasonable range of values for this product.
(2) Lost granules in late October 2017
(3) Anode sale in December 2017
"In order for you to meet your contractual obligations to Petroforce, we will agree to the release against:
1. 85% of the money owed by Petroforce in the Collection Account at BMCE (108 MT)
…
Once you have shipped those we will re-visit how we move forward on the rest, e.g. switch of products, granules, etc …, once we have received evidence of the "redress decision" and appointment of a Syndic and generally more information on that process as Pierre has already discussed with you last Thursday."
"A. Yes, that is what I say, and putting it into the context of continuing discussions with Mr Lamdouar, with Adnane Lamdouar, hopefully as a prelude to getting discussions going and putting together a recovery plan. Yes.
Q. But on the face of it, we have a situation with a loan in default, correct?
A. Yes.
Q. With pledged stock remaining, proceeds of sale which Scipion is entitled to to defray the outstanding loan, and Mr Lamdouar is being allowed to keep 15%?
A. Well, he is not being allowed to. I say -- my email reads that this is perhaps a reasonable consideration in the context of our ongoing discussions to get things unblocked. An awful lot has happened in the end of 2017. I do not want to get ahead of myself, but we will see in January and February, a lot more work was done to try to get the train back on the rails, and I do not say that this is the final word. …."
(J) CLAUSE 8.2 EXEMPTION
"In the event of bulk product, there shall be an exemption of all claims for the first 3 (three) per cent of the total quantity of product held in any one warehouse at any one time and, notwithstanding any other terms in [the CMA], [Vallis] shall not be liable for any indirect or consequential damages, including damages for loss of profits, incurred by [Mac Z], whether in contract or tort."
(K) CONCLUSIONS
i) damages equal to the value of the lost goods as at 9 October 2017;ii) subject to a deduction by reference to the value of the clause 8.2 exemption;
iii) together with statutory interest at a rate and basis, and on an amount, to be the subject of further argument;
iv) but subject to a limit represented by the amount now outstanding under the facility (including interest) net of recoveries received to date (those recoveries themselves being net of the collateral management fees and expenses referred to in §§ 222(iv)(a) and (b) and 237 above), less the value of the remaining goods and products including the remaining unstripped Maroc Telecom scrap valued at 20% of the LME copper price.