Socimer International Bank Ltd v Standard Bank London Ltd

Socimer International Bank Ltd v Standard Bank London Ltd

The agreement did not require Standard Bank to carry out an objective, market-based valuation or to exercise reasonable care in valuation; instead, it conferred a wide discretion on Standard to value the Designated Assets, subject only to the requirements of good faith, honesty, and rationality (i.e., not arbitrarily, capriciously, or perversely). No implied term of objective valuation or reasonable care was necessary or appropriate. The analogy with mortgagee duties was inapplicable. The trial judge erred in applying an objective standard and in rejecting Standard's unchallenged factual evidence. The appeal was allowed and a new trial ordered on the valuation issue.

Parties
Claimant/respondent: Socimer International Bank Limited (in liquidation); Defendant/appellant: Standard Bank London Ltd
Jurisdiction
England and Wales
Judgment Date
22 February 2008
Procedural Posture
Civil Appeal / Appeal From High Court Judgment
Outcome
Appeal allowed; judgment of Gloster J set aside; new trial ordered on valuation issue.
Legal Topics
Exercise of Contractual Discretion, Implied Terms, Valuation of Assets on Default, Set Off and Netting, Mortgagee Duties Analogy
Contract Law Banking and Finance Exercise of Contractual Discretion Implied Terms Valuation of Assets on Default Set Off and Netting Mortgagee Duties Analogy

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Parties

Socimer International Bank Limited (in liquidation)

Claimant/respondent

Standard Bank London Ltd

Defendant/appellant

Procedural Posture

Civil Appeal / Appeal From High Court Judgment

Legal Issues

  1. 1 Whether the agreement required Standard Bank to carry out an objective, market-based valuation or permitted a subjective, discretionary valuation on default
  2. 2 Whether an implied term of reasonable care or objective valuation should be read into the contract
  3. 3 Whether Standard Bank was required or would have set off certain credits against the Unpaid Amounts as at the termination date

Ratio Decidendi

The agreement did not require Standard Bank to carry out an objective, market-based valuation or to exercise reasonable care in valuation; instead, it conferred a wide discretion on Standard to value the Designated Assets, subject only to the requirements of good faith, honesty, and rationality (i.e., not arbitrarily, capriciously, or perversely). No implied term of objective valuation or reasonable care was necessary or appropriate. The analogy with mortgagee duties was inapplicable. The trial judge erred in applying an objective standard and in rejecting Standard's unchallenged factual evidence. The appeal was allowed and a new trial ordered on the valuation issue.

Court Disposition

Appeal allowed; judgment of Gloster J set aside; new trial ordered on valuation issue.

Orders

  • Judgment of Gloster J set aside
  • New trial ordered on the issue of valuation of Designated Assets as at the termination date