BP Oil International Ltd v Glencore Energy UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 09 March 2022 |
| Neutral Citation | [2022] EWHC 499 (Comm) |
| Docket Number | Case No: CL-2020-000197 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 499 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HON. Mrs Justice Moulder
Case No: CL-2020-000197
Steven Berry QC AND Adam Board (instructed by HFW) for the CLAIMANT
David Lewis QC AND Alex Carless (instructed by CLYDE & CO) for the DEFENDANT
Hearing dates: 17–20, 24,25,27 January 2022
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.
THE HON. Mrs Justice Moulder
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 10:30am on 9 th March 2022.
Introduction
This is a contractual claim for damages brought by BP Oil International Limited (“BPOI”) in relation to a cargo of crude oil which BPOI purchased from the defendant (“Glencore”) and which BPOI alleges was contaminated with organic chlorides.
Background
BPOI is an oil trading company incorporated in England and carrying on business in the sale and purchase of crude oil and petroleum products. Glencore is a commodity trading company incorporated in England engaged in the sale and purchase of commodities including crude oil.
Sale contract
By a contract of sale formed in April 2019, the terms of which are disputed, Glencore sold 100,000 MT +/- 10% of Russian Export Blend Crude Oil (“REBCO”) to BPOI, to be loaded between 13 and 18 April 2019, delivered CIF Rotterdam, and at a price of “Dated Brent + 0.53 USD” per barrel.
The contract of sale incorporated by reference BPOI's General Terms & Conditions for Sales and Purchases of Crude Oil and Petroleum Products 2015 Edition (the “GT&Cs”).
Sub-sale to BPESE
By a contract dated 5 April 2019 BPOI re-sold the cargo of REBCO to an affiliated company, BP Europa SE (“BPESE”) for delivery CIF Wilhelmshaven (the “Sub-Sale”). BPESE intended to process the cargo at its Gelsenkirchen refinery.
The Sub-Sale was agreed on materially back-to-back terms to those in the contract of sale, save that the purchase price was “Dated Brent plus a premium of 0.43 US dollars per US barrel”. However, as discussed below, the contract for the Sub-Sale made no reference to the purchase from Glencore and merely provided for a quantity of 100,000 MT of REBCO (plus/-10%) loaded at Ust-Luga between 13 – 18 April 2019.
Inspection and delivery
On or around 10 April 2019, the parties appointed Cargo Inspections Group (“CIG”) as independent load port inspectors.
On 16 April 2019, a cargo of REBCO (the “Cargo”) was loaded on board the M.T. “ALEXIA” at Ust-Luga, Russia. The Cargo was covered by two bills of lading dated 16 April 2019. A commercial invoice and letter of indemnity were issued dated 16 April 2019. On about 17 April 2019, CIG provided BPOI with certain shipping documents for the Cargo.
On about 22 April 2019 the Cargo arrived and was discharged at Wilhelmshaven.
Quality certificates
Two certificates of quality numbered “92a” (“CoQ 92a”) and “92b” (“CoQ 92b”) in respect of the Cargo were delivered to BPOI on about 17 April 2019.
Neither of these documents made any reference to organic chlorides.
Certificate of quality 92 (“CoQ 92”) was sent by CIG to Glencore on 25 April 2019 following an enquiry by Ms Pelyak of Glencore by email as to whether CIG had tested the Cargo for organic chlorides and whether the terminal had organic chloride results for the Cargo. CoQ 92 was first sent to BPOI on 8 May 2019.
Resale
By a contract dated 20 June 2019, as amended, the Cargo was re-sold by BPESE to BPOI for a purchase price of Dated Brent minus US$8 per barrel, with delivery ex ship Castellon.
By a further contract dated 20 June 2019, as amended, the Cargo was then re-sold by BPOI to BP Oil Espana SA (“BPOESA”) for Dated Brent minus US$8 per barrel, with delivery ex ship Castellon. The intention was for the contaminated oil to be diluted, blended and processed by BPOESA at its Castellon refinery. The oil was discharged in three tranches and then processed at that refinery.
Contamination
It is alleged for BPOI that upon sampling tests being carried out, it was discovered that the Cargo was contaminated by organic chlorides at a concentration of around 11.9 to 15.7 parts per million (“ppm”) (Amended Particulars of Claim).
Factual witnesses
BPOI
The court had witness statements from the following for BPOI:
i) Ms Tara Behtash;
ii) Mr Robert Earl;
iii) Mr Matthew Hague;
iv) Mr Duncan Haines;
v) Mr Ronald Sieder; and
vi) Ms Yael Spier.
Mr Earl, Mr Hague and Mr Haines were called and were cross examined.
Robert Earl
Before 1 January 2021, Mr Earl was the ESA Crude and Feedstocks Bookleader. ESA stands for Europe and South Africa. That role involved liaison between the BPOI crude oil trading business on the one hand and BP's refineries on the other hand, to procure from the market the crude oil and feedstocks that the refineries need.
Mr Earl was not directly involved in the conclusion of the deal with Glencore. He was involved in the sub sale to BPESE briefly because he was covering Mr Haines during the week of 1 April 2019, but according to his evidence, Mr Haines would have done all of the groundwork and liaising with BPESE in respect of their requirements before then. (Witness Statement of Robert Earl)
In my view Mr Earl sought to answer the questions posed in cross examination despite at times robust questioning from counsel. On the calculation of losses attributable to hedging I accept that Mr Earl was doing his best to provide a calculation which he felt reflected the actual losses attributable to hedging.
Duncan Haines
Mr Haines worked at BPOI where his role was to procure crude oil and feedstock for BP's refineries, including BP Gelsenkirchen. No criticism was made by Glencore of this witness.
Matthew Hague
Mr Hague is an oil trader for BPOI.
It was submitted for Glencore that:
“ On balance, Mr Hague was not a satisfactory witness. While he generally tried to answer questions directly and to help the Court, Mr Hague sometimes strayed from this approach when seeking to argue BPOI's case”
I found Mr Hague to be straightforward in his evidence particularly in the face of a line of questioning that he (and BPOI) had sought to concoct a paper trail to support the value at which the Cargo was sold and that in effect BPOI had no real intention of selling to MOH, and despite the point being put repeatedly by counsel for Glencore. I note his evidence in cross examination as follows:
i) in the context of being asked about an internal discussion seeking an indication from PBF, another refinery:
“ Q. Okay, and you want an indication “even if rancid” for the paper trail you've been asked to log by the crude supply coordination team; correct?
A. No, I think we're after indications because we're trying to find out where market value might be for such a contaminated cargo.” (Day 3, 19/01/2022, 53:10–53:15) [emphasis added]
ii) in relation to the MOH chat on 14 May where MOH stated that “ refinery would need to see $5–6 to consider it. So I think maybe we're not the best outlet for that” Mr Hague was asked:
“ Q. Did your sale efforts to MOH slow down on the Alexia cargo once this minus 5–6 indication had been given?
A. No, I mean, trying to sell something to MOH is usually quite a long grind, so I would have been chasing him on that as well as dealing with the other three cargoes we were trying to sell him simultaneously, and obviously you see I chase him again on the 23rd.” (Day 3 30:21–31:2) [emphasis added]
iii) In relation to the MOH chat on 16 May where MOH made no reference to the Urals oil:
“Q. Were you told not to pursue MOH –
A. No.
Q. — as at 16 May while BP looked at its own refinery in Spain?
A. Well, I pursued them again on the 23rd, so I don't believe so.
Q. But BP considers this a problem cargo with daily costs racking up. You have had a price indication of minus 5 to minus 6, whatever that means, and nine days pass before you go back. How is that to be explained, if you can recall?
A. I mean, my job was to find value for these cargoes, whether the best thing to do was suddenly drop $5 or $6 without having had conversations with others, I don't know, and obviously the system will have been looking at what they could have done with the cargo at the same time, so I don't think it's unreasonable…” (Day 3 31:24–32:15) [emphasis added]
As noted below, Mr Hague's evidence on this point accords with that of Mr Earl in cross examination.
iv) In the context of the chat on 23 May when MOH offered Dated Brent minus 8 for part of the Cargo and Mr Hague thanked MOH for its “ feedback”:
“ Q. And you say: “… thanks for the feedback, appreciate it”. Why do you describe it as “feedback”?
A. Because he's responded to my question.
Q. It's not because you're just trying to gather information so BP internally can decide a level for its own refining?
A. No, no. I mean, feedback is a phrase often used in the market. You're just thanking a person for doing the work to attempt to be able to show your bid in the market.
Q. BPOI never countered this minus $8 indication, did it?
A. I don't recall. I mean, most of my conversations with Alex were over the phone, but I don't recall making a counter, no.
Q. Is that because there was no real intention of selling to MOH by 23 May?
A. No, I don't think so. I think it's because it was for a small piece of the cargo at the other end of the Mediterranean on Greek out-turn which would have required a ship-to-ship and a further...
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