Coastal (Bermuda) Petroleum Ltd (Plaintiff v Vtt Vulcan Petroleum S.a. (Defendant "marine Star"

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE SAVILLE,LORD JUSTICE HUTCHISON,LORD JUSTICE NOURSE
Judgment Date03 Apr 1996
Judgment citation (vLex)[1996] EWCA Civ J0403-9
Docket NumberQBCMF 94/1089/B

[1996] EWCA Civ J0403-9

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

(Mr. Justice Mance)

Royal Courts of Justice

Before:

Lord Justice Nourse

Lord Justice Saville

and

Lord Justice Hutchison

QBCMF 94/1089/B

Coastal (Bermuda) Petroleum Limited
Plaintiff (Respondent)
and
Vtt Vulcan Petroleum S.a.
Defendant (Appellant)
"marine Star"

MR. A. POPPLEWELL (Miss H. Davies 3.4.96) (instructed by Messrs. Holman Fenwick & Willan, London EC3N 3AL) appeared on behalf of the Appellant Defendant.

MR. M. HAVELOCK-ALLAN QC (instructed by Messrs. Waterson Hicks, London EC3M 8AJ) appeared on behalf of the Respondent Plaintiff.

1

Wednesday, 3rd April 1996

LORD JUSTICE SAVILLE
2

By a contract made about 10th or 11th July 1991, the Appellants agreed to sell to the Respondents a cargo of Russian E-4 fuel oil for delivery "CIF basis Aruba 4–10 August 1991."

3

On 19th July 1991 the Appellants nominated mt "Marine Star/substitute." On 23rd July the Appellants purported to withdraw this nomination, as they had decided for commercial reasons to use the "Marine Star" cargo to perform a contract with another buyer. The Appellants then contended that they were relieved by the force majeure clause in the sale contract, since they were unable to provide a substitute. This contention failed for the reasons set out in the decision of this Court, given on an unsuccessful appeal by the Appellants from my decision in the Commercial Court to give summary judgment on liability (with damages to be assessed) against the Appellants for their failure to perform the contract: see [1993] 1 Lloyd's Rep. 329. In essence the Appellants were held to be in breach of contract in failing to deliver the cargo on the mt "Marine Star", and that it was beside the point that they could not find a substitute.

4

The present appeal is concerned with a point that has arisen on the assessment of damages. This matter came before Mance J in the Commercial Court, who heard evidence before giving a judgment in July 1994.

5

According to the findings in this judgment, the Respondents contracted with the Appellants in order to provide feedstock for use in a refinery at Aruba operated by Coastal Aruba Refining NV, one of the Respondents' associated companies. At the hearing the Respondents contended that they had entered into what they described as a "back-to back" sale contract with this company under which they had passed on the declaration and consequently become liable for non-delivery when the Appellants failed to perform their contract. The Appellants disputed this on the grounds that the relationship between the Appellants and their associated company was not intended to give rise to binding rights and obligations, so that there could be no question of any liability of the Appellants for any loss suffered by the associated company. That loss was said to be the loss of refining yield caused by the fact that the associated company could not use the Marine Star cargo.

6

Mance J decided this point in favour of the Respondents. He also decided that the associated company had sustained a loss of refining yield and assessed the amount of the loss. There is no appeal from this part of the decision. However, the Appellants also argued that even if there was a contract between the Respondents and their associated company, the force majeure clause in that contract (which was in the same terms as the force majeure clause in the contract between the Appellants and the Respondents) relieved the Respondents from liability for the loss of yield. Put shortly, the Appellants submitted that whereas they were not able to bring themselves within the force majeure clause viz-a-viz the Respondents, since their inability to deliver the Marine Star cargo was something entirely of their own making, the same was not the case as between the Respondents and their associated company.

7

Mance J also decided this point in favour of the Respondents and it is on this point that the Appellants have appealed.

8

The reasons which Mance J gave for this part of his decision appear at page 637 of the Report of his Judgment, which is to be found in [1994] 2 Lloyd's Rep.629. The Judge said this:—

"In my judgment the plaintiffs would not have been and are not entitled to rely on the force majeure clause in the circumstances of this case to negative any liability on their part towards Coastal Aruba. The main reason for this conclusion lies in the essentially back-to-back nature of the contract between the plaintiffs and Coastal Aruba. the reason d'être of that contract was, on the evidence and as a matter of common sense, to ensure a "flow of contracts" putting the plaintiffs and Coastal Aruba in the same position vis-a-vis each other as the defendants and the plaintiffs were towards each other. The force majeure clause was present in the contract between the plaintiffs and Coastal Aruba in case the defendants could rely on the force majeure in their contract with the plaintiffs. It was not there to enable the plaintiffs to set up defences against Coastal Aruba when the defendants had none vis-a-vis the plaintiffs; as the present case demonstrates, it would work to the detriment of the Coastal group rather than to its intended advantage if it were to be construed as having an independent operation of such a nature.

"The wording of the clause lends itself without difficulty in my view to a construction which matches the parties' general intentions. The first three underlined passages all clearly focus on objective interferences with the sellers' source of supply; for reasons which parallel those given by Mr Justice McCardie at p.721 on the facts of Lebeaupin v. Crispin, they could not cover simple contractual default by the sellers' own seller. The last underlined passage is worded entirely generally, so as to cover —

… any breach … or non-performance … which directly or indirectly results from any cause beyond sellers' control, whether such other causes be of the classes herein specifically provided or not.

However this leaves for consideration whether a cause is in the present context to be regarded as beyond sellers' control when it consists in simple default by the defendants as the sellers' own seller under a contract with...

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4 cases
  • Glencore Energy UK Ltd v Cirrus Oil Services Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 25 July 2013
    ...of The Kriti Rex were both wrong because they were inconsistent with the judgment of this court in Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum S.A. (No. 2) (The Marine Star) not referred to in The Kriti Rex possibly because it was decided after the conclusion of the argument and ......
  • Raiffeisen Zentralbank Österreich AG v Royal Bank of Scotland Plc
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 11 June 2010
    ...one which in practice would be dealt with dehors the courts: see Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum SA (No 2) [1994] 2 Lloyd's Rep 629) would have undermined the purpose of the transaction and denied Enron the very benefit which it was designed to secure. It was for that......
  • Galtrade Ltd v BP Oil International Ltd
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 5 July 2021
    ...This is supported by the observation of Mance J in Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum SA ( The “Marine Star”) [1994] 2 Lloyd's Rep 629, at p 639, that “ A party who acts to secure his position in advance of a breach which he predicts will occur takes the risk that it wi......
  • Maestro Bulk Ltd (Claimant (Charterers) v Cosco Bulk Carrier Company Ltd (Defendant (Owners)
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 15 December 2014
    ...was notionally concluded before the date of breach. 51 Although I was referred by the owners to the decision in The Marine Star [1994] 2 Lloyd's Rep 629, that does not assist. There, a claim arose in respect of a liability incurred to a sub-purchaser which had bought in a substitute cargo o......
1 books & journal articles
  • CONTRACT DAMAGES AND THE PROMISEE'S ROLE IN ITS OWN LOSS.
    • Australia
    • Melbourne University Law Review Vol. 42 Nbr. 2, April 2019
    • 1 January 2019
    ...Channel 9 (n 23) 159 (Hope JA), 162 (Priestley JA). (53) See, eg, Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum SA [No 2] [1994] 2 Lloyd's Rep 629, 635 (Mance J); Glory Wealth Shipping Pte Ltd v Korea Line Corp [2012] 1 All ER (Comm) 402, 408-9 [18] (Blair J) ('deemed mitigation').......

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