Failure to pass title in goods - Allocation of risks - Defence of common mistake - Status of a warehouse receipt - Bailment of goods - Limitation provisions in warehouse's terms and conditions - Estoppel  


Under five spot purchase contracts ("PCs"), Natixis ("the Bank")  agreed to purchase nickel ("the goods") from Marex, a commodities broker and trader ("the Trader"). The goods were stored at warehouses owned by Access World ("the Warehouse"). The PCs formed part of a conditional repurchase agreement, under which the Trader had the option to repurchase the goods at later dates. 

By way of clause 2(b) of the PCs, it was a contractual condition that the Trader was to "deliver or procure delivery of the Required Documentation" to the Bank. The Required Documentation" was defined as "warehouse receipts".  

Pursuant to clause 2(b), the Trader delivered 16 warehouse receipts to the Bank. It was subsequently determined that all 16 of the receipts had been forged by a third party. As a consequence, the Trader did not have, and the Bank never acquired, title to the goods. 

The Bank brought proceedings for damages before the English High Court against the Trader for breach of contract arising from the Trader's failure to pass on title in the goods. The Trader in turn brought claims in contract and in tort against the Warehouse. 


The Commercial Court (Mr Justice Bryan) upheld the Bank's claim against the Trader in full, and the Trader's claim against the Warehouse in part.

The Bank's claim against the Trader

The Judge held that the Trader was in breach of the PCs in failing to pass title in the goods and to provide "objectively genuine warehouse receipts" to the Bank.  The risk in respect of the forged receipts under clause 2(b) was on the Trader. 

The Trader sought to rely on the defence of 'common mistake', a defence which, if applicable, would render a contract void and discharge all past and future obligations between the parties as if the contract had never existed. The Court noted that the following essential elements which need to be established for this defence, as set out by the Court of Appeal in The Great Peace [2002]1  were not met: 

  1. There must be a common assumption as to the existence of a state of affairs;
  2. There must be no warranty by either party that the state of affairs existed;
  3. The non-existence of the state of affairs must not be attributable to the fault of either party; and
  4. The non-existence of the state of affairs must render performance of the contract impossible. 

The Court found that:- 

  1. There was no common assumption between the parties. The evidence showed that the Trader did not have any "actual positive belief" that the receipts were             genuine (element 1, above); 
  2. The Court had decided in its construction of clause 2(b) of the contract, that the Trader bore the risk and thus warranted that receipts tendered would be                     genuine. This finding alone was fatal to the Trader's defence of common mistake (element 2, above);
  3. The state of affairs, being that the warehouse receipts were to be genuine but were not, was attributable to the fault of the Trader (element 3, above);
  4. Once the forgeries had been identified, there was still enough time for the Trader to procure and produce genuine warehouse receipts in respect of the very same parcels of goods, but it did not do so. (element 4, above);

The Trader's claim against the Warehouse

The Judge rejected the Trader's claim in contract finding that:

  • The Warehouse had not entered into any contractual obligation either to the Bank or to the Trader to deliver valid warehouse receipts.
  • Under English law, a warehouse receipt is not a document of title, and is thus not capable of transferring title.  
  • Until attornment takes place, the relationship between the warehouse and a party with a right to possession of the goods is that of bailment. Attornment takes place when the warehouse operator acknowledges to the endorsee of the warehouse receipt that it holds the goods on the endorsee's behalf, and to its order.  
  • No unilateral or collateral contract containing a warranty existed between the Warehouse and the Trader in the absence of consideration from the Warehouse and an intention on its part to contract.
  • The warehouse was not estopped by its authentication emails from denying the validity of the receipts. A case based on estoppel could arise in the absence of a contract, for otherwise an estoppel would be used as a sword and not as a shield, which was not permissible.

The Trader partially succeeded in its claim against the Warehouse for the tort of negligent misrepresentation as:

  • The Warehouse was negligent in failing to identify that the receipts were forgeries and in negligently stating that they were authentic when they were not. By authenticating the receipts, the Warehouse breached the duty of care it owed the Trader and was responsible for the Trader's  economic loss. 
  • The Warehouse was nevertheless allowed to rely on its standard terms and conditions to limit its liability in negligence. This is because the Trader would have been aware of these terms and that they contain exclusions and limitations. What was required for there to be an effective reliance on the limitation or disclaimer in the terms was reasonable notice.  On the facts, the Trader had received sufficient notice.  


This case involves multiparty disputes in the context of the global warehousing industry. The judgement however provides detailed analysis and guidance on various legal concepts and defences, widening the relevance of this decision to disputes in other sectors.  

While it is rare for a defence of common mistake to be successfully made out, Members can nevertheless ensure that such a defence is never successfully run against them by ensuring that all the risks in a contract are clearly allocated between the parties.  This will defeat the third of the "essential elements" (above) required for this defence to succeed.

It is also interesting to note that the Warehouse was able to benefit from a limitation in its standard terms and conditions (in the negligence claim) when it has been decided that those standard terms did not give rise to a contractual relationship between the parties.

Finally, as an aside, an opportunity for the courts to consider the duty of fair presentation under the Insurance Act 2015 for the first time was missed in this case when the Trader and its insurers entered into a confidential settlement agreement.  The insurers had argued that they were entitled to avoid the policy because the Trader had failed to disclose material circumstances relating to its transactions and its trades. 


1The Great Peace (CA) [2002] EWCA Civ 1407;  [2002] 2 Lloyd's Rep 653; [2003] QB 679

Staff Author