Socimer International Bank Ltd v Standard Bank London Ltd [2008] EWCA Civ 116 (22 February 2008)

Socimer International Bank Ltd v Standard Bank London Ltd [2008] EWCA Civ 116 (22 February 2008)

The Court of Appeal held that Standard Bank's contractual discretion to value Designated Assets under clause 14(a)(bb) was not unfettered; it must be exercised honestly, in good faith, and not arbitrarily or irrationally. The correct test was not a purely objective market value, nor a wholly subjective 'would have' valuation, but a valuation reflecting Standard's own judgment, subject to the implied constraints of good faith and rationality. The trial judge erred in applying a wholly objective test. Cross-credits could be set off if contractually permitted. Socimer was entitled to advance its implied term argument, but the judge's rejection of Standard's unchallenged evidence was not...

Citation
[2008] EWCA Civ 116
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 / Court of Appeal Judgment
Outcome
Appeal allowed in part; judgment for Socimer set aside; matter remitted for reconsideration of valuation applying the correct legal test.
Legal Topics
Valuation of Assets on Default, Contractual Discretion, Implied Terms, Set Off, Liquidation of Assets
Banking Law Contract Law Valuation of Assets on Default Contractual Discretion Implied Terms Set Off Liquidation of Assets

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Parties

Socimer International Bank Limited (in liquidation)

Claimant/respondent

Standard Bank London Ltd

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Whether Standard Bank's valuation obligation under clause 14(a)(bb) required an objective market value or a subjective valuation reflecting Standard's own discretion
  2. 2 Whether cross-credits owed to Socimer should have been set off immediately against Unpaid Amounts
  3. 3 Whether Socimer could advance an implied term argument after Cooke J's construction judgment

Ratio Decidendi

The Court of Appeal held that Standard Bank's contractual discretion to value Designated Assets under clause 14(a)(bb) was not unfettered; it must be exercised honestly, in good faith, and not arbitrarily or irrationally. The correct test was not a purely objective market value, nor a wholly subjective 'would have' valuation, but a valuation reflecting Standard's own judgment, subject to the implied constraints of good faith and rationality. The trial judge erred in applying a wholly objective test. Cross-credits could be set off if contractually permitted. Socimer was entitled to advance its implied term argument, but the judge's rejection of Standard's unchallenged evidence was not...

Court Disposition

Appeal allowed in part; judgment for Socimer set aside; matter remitted for reconsideration of valuation applying the correct legal test.

Orders

  • The trial judge's valuation is set aside.
  • The matter is remitted for reconsideration of valuation based on Standard's discretion exercised in good faith and rationally.