Bominflot Bunkergesellschaft fur Mineralole mbH & Company v Petroplus Marketing Ag
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen,MR JUSTICE HAMBLEN |
| Judgment Date | 30 October 2012 |
| Neutral Citation | [2012] EWHC 3009 (Comm) |
| Docket Number | Case No: 2008-378 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 30 October 2012 |
[2012] EWHC 3009 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Hamblen
Case No: 2008-378
Philip Edey QC (instructed by Holman Fenwick Willan Llp) for the Claimant
The Defendant was not represented
Hearing dates: 22 October 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
By a sale contract concluded on or about 9 January 2007, KG Bominflot ("the Buyer") agreed to buy and Petroplus ("the Seller") agreed to sell 38,500mt +/- 10% at the Buyer's option 1% EU qualified gasoil ("the gasoil") ex the BRC refinery in Antwerp at an FOB price equivalent to the International Petroleum Exchange ("IPE") February 2007 contract, minus $9.50/mt ("the contract").
Prior to loading, shoretank samples of the gasoil were tested by SGS and the gasoil was certified to be (and the Buyer accepts that it was in fact) on specification, including as to sediment content. Loading on board the MERCINI LADY ("the vessel") was completed on 17 January 2007. By the time the vessel arrived at El Ferrol only 4 days later, the cargo was off-specification as to sediment.
It is the Buyer's case that:
(1) The reason the gasoil's sediment content increased in such a short period of time was that the gasoil was, on delivery, "unstable" i.e. the gasoil contained unstable components which, when combined with air, oxidised, with such oxidation in turn producing (within the short voyage to El Ferrol) gums and sediments that were not there on delivery.
(2) Such an unstable gasoil (even prior to formation of sediment) could and would not be used for any of the purposes for which a gasoil of this description would normally be used (because of the risk of sediment formation) and was therefore, on delivery, not of satisfactory quality. The fact that the instability only manifested itself after delivery (in the form of increased sediment) is irrelevant.
The Buyer alleges that in those circumstances the Seller was in breach of the implied term under s.14(2) of the Sale of Goods 1979 ("SGA") that the gasoil should be of satisfactory quality on delivery and seeks to recover the losses allegedly caused thereby.
The matter comes to trial following an attempt by the Seller to defeat the Buyer's claim on the trial of certain preliminary issues (reported at [2009] 2 Lloyd's Rep. 679 – Field J) and a subsequent appeal to the Court of Appeal (reported at [2011] 2 Lloyd's Rep. 442 – the main judgment being given by Rix LJ with whom Maurice Kay and Patten LJJ agreed), as to what terms as to quality were to be implied into the contract in circumstances where it contained detailed specifications and a certificate final clause. The result of those proceedings is that the s.14(2) term is to be implied.
In the meantime:
(1) At the end of 2011/early 2012, the Seller went into a form of administration in Switzerland.
(2) In April 2012, its former solicitors in these proceedings came off the record and it is no longer represented by solicitors nor has it obtained (or sought) permission from the Court to be otherwise represented (pursuant to CPR 39.6 and PD 39A, para.5).
(3) Very recently, the Seller applied for and obtained recognition here of the administration as a foreign main proceeding in accordance with the UNCITRAL Model Law on cross-border insolvency as set out in Schedule 1 to the Cross-Border Insolvency Regulations 2006. However, the stay of these proceedings which automatically follows such recognition has been lifted.
(4) The Seller has to date served no factual or expert evidence and is, as a result of the order of Field J dated 24 July 2012, precluded from serving such evidence or from running any positive case as regards the facts or matters of expertise that are otherwise in issue on the pleadings.
In the result the Seller was not represented at trial nor did it present any evidence or advance any submissions. Its case stands as set out in its Amended Defence ("ADef").
The Buyer nevertheless opened the case in detail both in writing and orally. It called its factual and expert witnesses in the usual way to confirm their witness statements and to answer any questions that the Court might have.
The evidence
In addition to the documentary evidence derived from the parties' disclosure and set out in the Trial Bundles, the Court was provided with witness statements and evidence from Mr Rolf Roeper, the Buyer's Risk Manager at the time, and Mr Juan Jose Alvarez Gonzales, the Buyer's Managing Director.
It was also provided with expert reports and evidence from Mr Roland Revell, a petroleum chemist consultant with Minton Treharne & Davies, and Ms Catherine Jago, an oil and energy industry expert with CJH Energy Limited.
All the written evidence relied on by the Buyer had been served on the Seller.
The issues
Leaving aside various factual matters not admitted by the Seller (but in respect of which it has not pleaded a positive case), the main issues raised on the pleadings are as follows:
(1) Were the high sediment levels found at El Ferrol the result of the gasoil being the subject of rust and/or inorganic contamination on board the vessel?
(2) If not:
(a) Was the gasoil unstable on shipment/delivery?
(b) If so, was the gasoil therefore not of satisfactory quality on shipment/delivery? In particular, is an unstable gasoil of this description suitable for all the purposes for which gasoil of this description is commonly supplied?
(3) If the gasoil was not of satisfactory quality, is that a breach of contract by the Seller in circumstances where the way in which the problem would (and did) manifest itself was increased sediment which is a matter covered by the contractual specification?
(4) If so, did that breach cause the Buyer the losses alleged?
(5) If so, were the legal costs paid by the Buyers to owners in connection with a claim brought by owners arising out of the fact that the vessel arrived at El Ferrol with off-specification gasoil too remote to be recoverable?
(6) Did the Buyer fail to mitigate its losses by not removing the sediment by filtration and treating any instability?
However, as a result of the Order of Field J dated 24 July 2012, in circumstances where the Seller has served no evidence within the time stipulated by that Order, the Seller is precluded from running any positive case as to any fact or matter of expertise which is in issue.
The contract
The contract was entered into on or about 9 January 2007. It materially provided as follows:
(1) Clause 4.1 set out various quality specifications for the gasoil, including that the total sediments should not exceed 10mg/litre. However, there is no specification as to stability.
(2) Quality was to be determined by a surveyor (to be agreed upon) at the loadport on the basis of shoretank samples and the determination was to be final and binding save in the case of fraud or manifest error (Cl.12).
(3) Under Cl.15, risk and title was to pass when the gasoil passed the vessel's permanent hose connection at the loadport at which time the Buyer assumed all risks pertaining to the gasoil.
(4) Within Cl.18 is an exclusion clause on which the Seller relied, unsuccessfully, on the trial (and appeal in respect) of the preliminary issues.
The on-sale contracts
The gasoil was on-sold by the Buyer to its sister company, Bominflot SA on a CIF El Ferrol and Cartagena basis. Bominflot SA had in turn on-sold the gasoil to the Spanish Ministry of Defence on a CIF EL Ferrol and Cartagena basis. In each case the contract required the gasoil to have maximum sediments of 10mg/litre (i.e. just as in the head contract between the Buyer and Seller).
The background facts
I find the background facts to be as follows:
(1) The agreed loadport surveyor was SGS. Prior to loading at Antwerp, SGS tested a composite sample made up of samples of the gasoil taken from the 5 shoretanks (2233, 2241, 2245, 2332 and 2434) from which the gasoil was loaded on to the vessel. The results of that test were recorded in SGS' Certificate of Analysis and indicated that total sediments in that sample were 6.4mg/litre.
(2) The Buyer accepted that the gasoil complied with the contractual specifications, including as to sediment, on delivery (even though a test method other than that specified in the contract was used to test for sediment).
(3) A total of 39,988.029mt gasoil was loaded on board the vessel under two bills of lading, for carriage to and delivery at El Ferrol and then Cartagena, Spain. Loading was completed at 0245hrs on 17 January 2007, with the vessel departing at 0630hrs that day.
(4) The vessel arrived at El Ferrol on the morning of 21 January 2007 i.e. only 4 days after completion of loading at Antwerp. That was within a reasonable time of delivery of the gasoil, i.e. on board the vessel, as accepted by the Seller before the Court of Appeal: Rix LJ at paras.32 and 64(1).
(5) Composite samples of gasoil were taken from each of the vessel's tanks on 21 January, tested (on behalf of the Spanish Ministry of Defence) by Laboratorio de Fluidos and in every case found to be off-specification as to sediment, with the results ranging from 11 to 104mg/litre.
(6) Further samples from the vessel's tanks were taken on 22 January and tested as follows:
(a) Upper, middle and lower samples were taken from each tank on behalf of the Spanish Ministry of Defence and again tested by Laboratorio de Fluidos who found that the average sediment quantities across the three...
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