Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum SA ('The Marine Star') [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mance J |
| Judgment Date | 24 June 1994 |
| Date | 24 June 1994 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Mance J.
Andrew Popplewell (instructed by Holman Fenwick & Willan) for the sellers.
Mark Havelock-Allan (instructed by Waterson Hicks) for the buyers.
The following cases were referred to in the judgment:
Bourgeois and Wilson Holgate, ReUNK (1920) 25 Com Cas 260.
Patrick v Russo-British Grain Export Co LtdELR [1927] 2 KB 535.
Coastal International Trading Ltd v Maroil AG [1988] 1 LI Rep 92.
Kwei Tek Chao v British Traders and Shippers LtdELR [1954] 2 QB 459.
Lebeaupin v Richard Crispin and CoELR [1920] 2 KB 714.
Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (“The Pegase”) [1981] 1 LI Rep 175.
Yamashita Shinnihon Steamship Co Ltd v Elios SpA (“The Lily Prima”) [1976] 2 LI Rep 487.
Damages — Assessment of damages — Breach of contract — Non-delivery of cargo of fuel oil — Back-to-back contracts for sale on — Causation of loss — Whether force majeure a defence — Availability of replacement goods — Calculation of loss of profit — Calculation of loss of yield.
This was an assessment of damages for breach of contract for non-delivery of a cargo of fuel oil, liability having already been established.
The plaintiff company was a member of a group of oil refining and trading companies. The defendant Swiss company traded in oil. On about 10 July 1991 the defendant agreed to sell to the plaintiff a quantity of fuel oil for delivery CIF between 4 and 10 August. The defendant, which was required to nominate the carrying vessel by the end of July, nominated the vessel “Marine Star” to deliver 56,387 metric tons of Russian E-4 fuel oil to the plaintiff at Aruba, in the Netherlands Antilles. The plaintiff accepted that nomination on 23 July, but later that day the defendant purported to withdraw the nomination with a view to making a future substitution, which was neither made nor agreed. On 31 July the plaintiff purchased a replacement cargo of M-100 oil delivered to Aruba on board the “Donna Rita”. On 2 August 1991 the plaintiff treated the defendant as in repudiation and brought proceedings. Saville J held the defendant to be in breach of contract for non-delivery of cargo on board the “Marine Star” in the absence of any substitution. It could not rely on force majeure because they had voluntarily withdrawn the “Marine Star” for their own commercial reasons. The Court of Appeal dismissed the defendant's appeal. Judgment was entered for the plaintiff for damages to be assessed.
The plaintiff claimed damages under two heads: (1) loss of profit at 25 cents per barrel arising from the fact that they had agreed to sell the cargo on to Coastal Aruba, another company in the same group, at the price quoted on the New York Mercantile Exchange (“Nymex”) less US$6 per metric ton (US$95,139.85); and (2) loss of yield, arising from the purchase from Vitol SA of a cargo of M-100 delivered to Aruba on 15-16 August on board the “Donna Rita” in replacement for the E-4 cargo on the “Marine Star” (US$576,490.45).
Held, assessing damages payable by the defendant to the plaintiff at US$188,624.77:
1. On the evidence, the plaintiff entered into a contract with legally binding terms for the sale of the fuel oil on to Coastal Aruba on terms (subject to certain exceptions) back-to-back with those of the plaintiffs purchase from the defendant.
2. There was no available market at the end of July or the beginning of August 1991 for the purchase of replacement goods complying with the contract description for delivery to Aruba between 4 and 10 August. The lack of an available market resulted not from any particular intervening event but from a combination of market forces, a tight contractual delivery date and a late repudiation by the defendant.
3. To recover for loss of profit it was not necessary to establish that it was within the contemplation of the parties when they agreed that there would, in the event of non-delivery, be no available market for acquiring replacement goods. The existence of an available market operated as a restraint on recovery; its presence or absence did not have specifically to be contemplated.
4. It was within the assumed scope of both parties' contemplation when the plaintiff contracted to buy E-4 fuel oil from the defendant that the plaintiff could make a profit from resale and delivery of such E-4 to Coastal Aruba on a broadly back-to-back basis. There was nothing about the size of any profit, in the light of such variations in terms as there were on resale, to take it outside the scope of their contemplation. Accordingly the plaintiffs claim for loss of profit succeeded in its entirety in the sum of US$95,139.85.
5. Since the defendant could not rely on the force majeure clause in their contract with the plaintiff because it was their own commercial decision not to deliver the cargo on the “Marine Star”, they were not entitled to rely on the force majeure clause to negative any liability on their part to Coastal Aruba.
6. Although a party who acted to secure his position in advance of a breach which he predicted would occur took the risk that it would not occur, he was entitled to attribute his conduct to the breach if and when his prediction proved sound. It was inappropriate to insist rigidly on a particular temporal order of events in analysing causation in back-to-back or string contracts. The fact that the plaintiff purchased the replacement cargo on 31 July but did not in law accept the defendant's breach of contract until 2 August did not prevent the plaintiff from attributing any liability they might have to Coastal Aruba for loss of yield to the defendant's breach on 2 August.
7. On the available evidence the loss of yield was assessed at an average of 30 cents per barrel, resulting in damages for loss of yield of US$93,484.92.
Mance J: The plaintiffs are a member of a substantial group of oil refining and trading companies of which the ultimate parent is the Coastal Corporation of Delaware in the US. At the material times in 1991 the Coastal group operated some nine refineries, including one at Aruba in the Netherlands Antilles, acquired by another company in the group called Coastal Aruba Refining NV (“Coastal Aruba”), which that company operated from about November 1990 after extensive refitting. Another of these refineries was at Corpus Christi, Texas. The defendants are a Swiss company engaging in oil trading. By contract made on or about 10-11 July 1991, the terms of which were confirmed in telexes from brokers, Aspen Oil, to the plaintiffs and in a recapitulation telex dated 16 July 1991 from the plaintiffs to inter alia the defendants, the defendants agreed to sell and the plaintiffs to buy a quantity of '50,000/55,000 metric tons sellers option outturn quantity' of “standard Russian E-4 straight run fuel oil ex Black Sea” for delivery “CIF basis Aruba 4–10 August 1991”.
The contract further provided:
“Nomination: Ship's nomination to be given to buyers latest at the time vessel passes Gibraltar.
Price: To be the average closing price for September WTI as quoted on the Nymex for 5 to 9 August 1991 inclusive minus US$6.25 on outturn quantity.”
The reference “WTI as quoted on the Nymex” is to the price per barrel of West Texas International crude traded on the New York Mercantile Exchange, the oil futures market in New York. Dependent on the precise steaming time taken for the Atlantic crossing, the effect of the nomination clause was to require the defendants to nominate the carrying vessel by a date at or near the end of July 1991. The contract also included an extensive force majeure clause to which I shall revert.
By telex on 19 July 1991 the defendants gave the following nomination:
| “Vessel: | MT Marine Star/substitute |
| Position: | Vsl will pass Gibraltar 20 July 91 noon |
| Product: | Russian E-4 straight run fuel oil |
| B/L Date: | 11 July 1991 |
| B/L Quantity: | 56,387.530 MT |
| Loadport: | Odessa” |
On 23 July 1991 the plaintiffs replied:
“We confirm acceptance of vessel ‘Marine Star”/sub to deliver 56,387.530 M/T Russian E-4 straight run fuel oil to Coastal Aruba Refining company NV, San Nicholas, Aruba.”
They asked for details of the vessel's ETA and the documents on board. However, later on the same day, the defendants purported to withdraw the nomination of the “Marine Star” with a view to making a future “substitution” which was in the event neither made nor agreed. On 2 August 1991 the plaintiffs treated the defendants as in repudiation. By judgment dated 23 November 1992 in this action the Court of Appeal affirming Saville J held the defendants in breach of contract by reason of the non-delivery of cargo on board the “Marine Star” in the absence of any substitution. It was held to be no answer to the defendants to suggest that circumstances of force majeure had prevented them making a substitution, since their purported withdrawal of the Marine Star had been voluntary and for their own commercial reasons. Judgment was thus entered against the defendants for damages to be assessed ([1993] 1 LI Rep 329). I now have before me the assessment of damages.
The plaintiffs claim to have sustained damages under two heads: (1) loss of profit, at the rate of 25 cents per barrel, arising from the fact that the plaintiffs had agreed to on-sell the cargo to Coastal Aruba at Nymex less US$6 per metric ton; and (2) liability said to exist towards Coastal Aruba for loss of yield, arising from Coastal Aruba purchasing from Vitol SA, in replacement of the E-4 cargo on the Marine Star, a cargo of M-100 delivered to Aruba on 15-16 August 1991 on a vessel called the Donna Rita. Both heads of claim are in substantial issue. The figures claimed are (1) US$95,139.85 for loss of profit calculated at 25 cents per barrel on 56,387.50 metric tons on board the Marine Star converted into barrels at a rate (amended by...
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