Mercuria Energy Trading Pte Ltd & Anor v Citibank NA & Anor

Delivery of goods held by a warehouseman generally requires the warehouseman to attorn to the buyer. Endorsed warehouse receipts do not themselves transfer constructive possession unless they are documents of title within Sale of Goods Act 1979 s 29(4). Contractual wording may define the parties’ obligations, but an isolated phrase dispensing with warehouse confirmation must be read with the agreement as a whole. It cannot be used to transform documentary tender into delivery where the contract otherwise requires transfer of title and possession. A contractual right to accelerate payment obligations does not ordinarily suspend debts already accrued. A party’s accrued contractual or common-law right to terminate is not lost merely because it would itself have been unable to perform later obligations; that issue may affect compensation rather than termination.

The claim arose from repo transactions in aluminium and copper. Citi had purchased metal from Mercuria under agreements providing for later forward sales of equivalent metal. Following suspected fraud and uncertainty over the existence and title of metal stored in Chinese warehouses, Citi accelerated the forward-sale dates and tendered endorsed warehouse receipts. The warehouse operators had not attorned to Mercuria.

The parties disputed whether the tender constituted delivery, whether Citi could invoke an alternative contractual performance mechanism, whether the notices were valid, whether Mercuria’s payment obligations were suspended, and whether either party could terminate the agreements.

1. Delivery. Under Sale of Goods Act 1979 ss 29(4) and 61(1), where goods are in a third party’s possession, delivery requires the third party’s acknowledgement that it holds the goods for the buyer, unless a document of title is transferred. The warehouse receipts tendered by Citi were not documents of title. They therefore did not transfer constructive possession or effect delivery.
2. The contractual provisions had to be construed together. The agreements repeatedly required delivery of metal and contemplated delivery by release confirmation or document of title. The forward-sale wording requiring an in-warehouse transfer with transfer of title and possession was inconsistent with the later phrase dispensing with warehouse confirmation. That phrase was repugnant and had to be rejected. Citi had not delivered the metal.
3. Citi could not presently invoke clause 7.2(B). Any inability to deliver appeared to arise from the events constituting the Termination Event, which excluded that alternative mechanism.
4. The bring-forward notices were valid for the Qingdao and Penglai transactions. Citi held the required opinion, and its opinion was at least rational and objectively reasonable. Satisfactory storage included the ability to access and obtain delivery of the goods. The notices were transaction-specific, so any issue concerning Shanghai did not invalidate the others.
5. The Termination Event notice did not suspend Mercuria’s accrued payment obligations. Clause 10.3(B) concerned payments falling due thereafter. The approach in Lomas v JFB Firth Rixson Inc and Credit Suisse International v Stichting Vestia Groep was applicable.
6. Mercuria was entitled to damages for non-delivery in relation to Transaction 6, but not restitution because it had not terminated that transaction. Citi was not entitled to judgment for the price because payment would generate an immediately corresponding claim and circuity of action. Citi remained entitled to terminate the agreements, contractually and at common law. The claim and counterclaim were determined accordingly, with the parties invited to agree an order.