BP Oil International Ltd v Vega Petroleum Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 21 May 2021 |
| Neutral Citation | [2021] EWHC 1364 (Comm) |
| Docket Number | Case No: CL-2019-000414 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 May 2021 |
[2021] EWHC 1364 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Cockerill DBE
Case No: CL-2019-000414
Michael Ashcroft QC and Oliver Caplin (instructed by HFW LLP) for the Claimant
Edward Cumming QC and Ben Waistell (instructed by Bird and Bird LLP) for the Defendants
Hearing dates: 23, 24, 29 and 30 March 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mrs Justice Cockerill
Introduction
This is a case which combines elements of the usual and the unusual. The starting point is fairly orthodox. BP Oil International Limited (“ BPOI”) entered into a series of contracts which on their face provided for sale of 211,387 barrels of Gulf of Suez Mix crude oil (“ GOSM”) “FOB Ras Shukheir Terminal”. Pursuant to those contracts between June 2013 and February 2015 BPOI paid a total of US$17,235,448 to the First Defendant, Vega Petroleum Limited (“ Vega”) and the Second Defendant, Dover Investments Limited (“ Dover”), together the “ Defendants”.
To date BPOI has not received the crude oil in question. It claims in unjust enrichment for the return of the purchase price sums that it has paid over in relation to the GOSM, on the basis that it has received no consideration at all.
The question at the heart of the dispute between the parties is fairly simply stated: whether (as the contracts might on their face suggest) the payments BPOI made entitled it to delivery of the 211,387 barrels of GOSM such that if that oil were not delivered it was entitled to its money back; or whether those payments were rather to acquire a right to lift quantities of oil (to be determined on a monthly basis in accordance with the Contracts) and were, accordingly, unconditional payments, such that BPOI was to have no recourse against the Defendants to recover them subsequently if BPOI simply chose never to lift the quantity of oil that it was entitled to lift. BPOI predictably contends for the former, the Defendants for the latter.
The Defendants say that their construction is consistent with the unusual facts surrounding the contract and with facts that the terms of the Contracts:
a. Expressly contemplated that BPOI may choose never to lift all or some of the oil which it would become entitled to lift, and provided no mechanism for BPOI to recover any sums paid to the Defendants in such circumstances; and
b. The amount of the monthly payments was to be determined by BPOI itself, unilaterally, after applying a substantial discount to the Platts Dated Brent assessments of the price of the oil each month. The Defendants say that this “discount factor” reflected the allocation to BPOI of the risk that it may subsequently choose not to uplift any particular quantity of oil.
This is the centre of gravity of the dispute. But there are a variety of other points.
The trial
The case has been tried remotely over the course of a four day hearing. It has been conducted with great skill, politeness and professionalism on both sides.
BPOI did not call Mr Jonathan Lunn, the trader responsible for BPOI's relationship with the Defendants prior to and at the time of each of the Contracts and who was also the relevant decisionmaker in respect of the Contracts. Mr Lunn left BPOI's employ several years ago.
BPOI relied instead on the evidence of four witnesses, three of whom attended the trial to give oral evidence (Messrs Al-Ruhaimi, Gimenez, and Finlinson). Mr Williams was not able to attend the trial on health grounds, and a hearsay notice in respect of his statements was served.
Mr Al-Ruhaimi is (as of January 2021) the Crude Technical Lead at BPOI, but from March 2014 until January 2019 he was a crude oil trading operator for BPOI. His role as an operator was to execute the physical trades concluded by BPOI's traders, with whom he worked. Amongst others, he worked with BPOI traders Mr Jonathan Lunn (who left BPOI several years ago) and Mr Finlinson. He was responsible for the scheduling, logistical, and operational roles in relation to the Contracts – taking over that role from Mr Williams. Mr Al-Ruhaimi had obviously been quite junior at the time, but I found him to be a frank and clear witness whose evidence I found to be convincing and helpful. Mr Cumming QC for the Defendants rightly accepted that Mr Al-Ruhaimi was seeking to assist the Court.
Mr Gimenez was a crude oil originator for BPOI until 2017. Between 2013 and 2017 he took on the management of BPOI's trading relationship with Egypt and its Egyptian counterparties. As part of that role he was required to liaise with EGPC and manage that relationship. He was a careful and straightforward witness.
Mr Finlinson is a crude oil trader at BPOI. He was the most senior of BPOI's witnesses, but had little involvement in any matters of relevance. He technically took over Mr Lunn's role but the impression was that he was not a like for like replacement, with less involvement on the ground. His principal involvement concerned an ultimately failed attempt by BPOI from 2017 to assign its rights to delivery of the GOSM under the Contracts to EGPC, and the Defendants' nascent assistance in enabling the contemplated assignment.
Mr Williams was until recently a demurrage negotiator at BPOI. On 18 December 2020 he left BPOI's employment. From 2008 to 2019 he worked in BPOI's crude oil operations team as an operator. From 2012 to around May 2014 he was responsible for operations matters under the Contracts.
The Defendants relied on evidence from two witnesses. Mr Haytham Ataya is the COO of Vega, and has held that role in the company since it was founded in 2011. His evidence explained that he oversees “ all operations and technical functions of the company”: including the holding of various concessions in Egypt.
Mr Ataya was a combative witness who often did not appear to have listened to the questions he was being asked, though I bear in mind that his failure to engage with questions may have been in part due to the fact that he was giving evidence in a language which was not his first language. I did not find his evidence particularly helpful. In listening to Mr Ataya give evidence it was quite apparent how the case which the Defendants ran had emerged. He emerged as a dogmatic rather than reflective person, not terribly interested in listening to what was said to him.
Mr Robert Salna is the President and CEO of Dover. Dover appears to be a private investment vehicle set up by Mr Salna in 1999 to enable him to invest his private wealth in the oil production business. Mr Salna was not a particularly clear or helpful witness.
Factual Background
Context
This case concerns the arrangements by which BPOI agreed to purchase, and have delivered to it, quantities of GOSM produced from, amongst other things, petroleum fluids sourced from the Ras El Ush Field in the Gebel El Zeit Concession in Egypt (the “ REU Field” and the “ Concession”).
In common with many locations around the world from which the global supply of what becomes crude oil is drawn, the oil industry in Egypt operates by way of a complex interaction between state owned and private corporate entities – often via joint venture companies. The first is the Egyptian General Petroleum Company (the “ EGPC”). EGPC is a state-owned oil company and operates under the guidance of the Egyptian Ministry of Petroleum. It is responsible for all sectors of the Egyptian petroleum industry. If a private commercial entity wishes to carry out commercial oil exploration/production operations in Egypt, it must do so in participation with EGPC via a joint venture. Because of its responsibility for the Egyptian petroleum industry, before any person can lift oil from Ras Shukheir Terminal (whether domestically or for export) the lifting party needs to obtain EGPC's approval.
Gulf of Suez Petroleum Company (“ GUPCO”), was one such joint venture. GUPCO has been in existence since 31 July 1965. GUPCO is the operator of the Merged Area Concession in Egypt. At all material times in this case EGPC's JV partner within GUPCO was BP Egypt (a different company within the BP group to BPOI). Prior to this, EGPC's JV partner in GUPCO was Amoco Egypt Oil Company (“ Amoco”) – which BP Egypt replaced in 1999.
Another JV entity including EGPC is the Gebel El Zeit Petroleum Company (“ Petrozeit”). EGPC's original JV partner within Petrozeit was Marathon Petroleum Gebel El Zeit (“ Marathon”). Petrozeit is the operator of the Gebel El Zeit Concession in Egypt (the “ Concession”). By the time events in this case came to pass, EGPC's JV partner within Petrozeit was first Dover, and then Dover and Vega together.
The GUPCO/Petrozeit Processing Agreement
On 13 July 1997 GUPCO and Petrozeit concluded a Processing and Handling Agreement concerning petroleum fluids realised from the Ras El Ush (“ REU”) field in Egypt, and to be processed at two of GUPCO's facilities – REU Facility and Ras Shukheir Facility (the “ Processing Agreement”).
The agreement contemplates that the petroleum fluids produced from the REU Field are brought onshore to an initial processing facility and then delivered to facilities owned and operated by GUPCO. They are then co-mingled with fluids from other fields before GOSM crude oil is produced at GUPCO's...
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