Glencore International AG v Alpina Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Moore-Bick |
| Judgment Date | 23 January 2004 |
| Neutral Citation | [2003] EWHC 3272 (Comm),[2004] EWHC 66 (Comm),[2003] EWHC 2792 (Comm) |
| Docket Number | Case No: 1998 Folio 1588 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 January 2004 |
AND in the following actions: 1998 Folio No.219, 1998 Folio No.248, 1998 Folio 273, 1998 Folio No.513, 1998 Folio No.1091, 1998 Folio No.1598;
AND in the interpleader actions set out in the Schedule to the Order of Rix J. dated 16 th November 1999;
AND also in action 1998 Folio No. 654
[2003] EWHC 2792 (Comm)
The Honourable Mr Justice Moore-Bick
Case No: 1998 Folio 1588
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Jonathan Sumption Q.C., Mr. Alistair Schaff Q.C., Mr. Richard Southern and Miss Caroline Laband (instructed by Clyde & Co) for the claimant
Mr. Dominic Kendrick Q.C., Mr. Simon Rainey Q.C., Miss Siobán Healy and Mr. John Bignall (instructed by DLA) for the defendants
THE METRO LITIGATION – PHASE 5
Mr Justice Moore-Bick:
I. Introduction
The Metro litigation
This is what has come to be known as Phase 5 of the Metro litigation arising out of the collapse of Metro Trading International Inc. ("MTI") and Metro Oil Corporation ("MOC"), collectively known as the Metro Group, in February 1998. For some years prior to that MTI had operated a floating oil storage facility and bunker supply business using a number of vessels anchored in the waters off Fujairah. The centre of these operations was the Metrotank, a ULCC that had been specially modified for the purposes of fuel oil blending operations. MOC operated a refinery and oil storage facilities at Fujairah for the processing of crude oil and the handling of the resulting products.
A number of different oil companies entered into contracts with MTI for the storage of various grades of oil at Fujairah and in some cases they also sold oil held in store to MTI for use in its bunker supply business. Of these by far the largest depositor in terms of the quantities of oil delivered into storage was Glencore International A.G. ("Glencore"). Glencore and other companies also entered into agreements with MOC for the processing of crude oil under which they were entitled to receive refined products in return for the feedstocks they supplied. MTI supplied bunkers to ships calling at Fujairah and from time to time also sold cargoes of bunker fuel, mainly for export to the Far East. In order to enable it to finance its business MTI obtained support in the form of credit lines from a number of banks, principally Banque Trad Crédit Lyonnais.
When the Metro Group collapsed Glencore and the other depositors discovered that the quantity of oil held in the floating storage facility was far smaller than ought to have been the case. The Metro Group was hopelessly insolvent and accordingly many of those involved, including the banks who had lent money to MTI to enable it to buy oil, asserted proprietary claims against the oil remaining in its possession and also asserted rights to recover amounts due to MTI in respect of the outstanding price of bunkers supplied to third parties. Other claims were made against those who had received shipments of bunker fuel on the grounds that they had wrongfully interfered with goods that did not belong to them. Glencore also made a claim against its insurers in respect of the loss of oil that had been delivered to MTI for storage but was no longer in its possession and could not be accounted for and a similar claim in respect of refined products that MOC had produced under the processing agreement between them but were likewise no longer in its possession and could not be accounted for.
At the outset the Metro Litigation comprised 35 separate actions involving over 50 different parties. In order to enable them to be tried in an orderly and efficient manner, the court directed that they should be managed together and that the issues to which they gave rise should be determined in groups in relation to all the actions. Accordingly, in Phase 1 I decided a number of issues of principle relating to the law applicable to the passing of title to oil held in storage in Fujairah. In summary, I held that under English conflicts of laws rules the transfer of title to movable property is governed by the law of the place where that property is situated, that being in the
The nature of the contractual relationships between each of the various oil company claimants and MTI was to be determined as Phase 2, but in the event the trial was confined to the relationship between Glencore and MTI. In my judgment at Phase 2 I considered the contractual arrangements between MTI and Glencore and the effect under the law of Fujairah of various dealings with the oil held in storage in the context of those contractual arrangements. My judgment is not reported, but can be obtained on-line from the British and Irish Legal Information Institute ("BAILII").
Phase 3 was to involve the determination of the proprietary claims of the banks that had provided financial support to MTI to enable it to buy the oil it needed for its business, but in the event those claims were resolved without the need for a trial.
It was envisaged at an early stage that the competing claims to the oil remaining in store based on the decisions reached in Phases 1 to 3 and a detailed analysis of the movements of oil into and out of the floating storage facility at Fujairah would form Phase 4 of the litigation, leaving Glencore's claim against its insurers to be determined as Phase 5. However, tracing the movements of oil into and out of the facility has proved to be a complex and difficult task and it has therefore been postponed to a later date. As a result I am now concerned with Phase 5 of the litigation, namely, Glencore's claim against its insurers, Alpina Insurance Co. Ltd ("Alpina") and certain other insurers in the Swiss market, in respect of oil misappropriated by MTI from the floating storage facility at Fujairah and refined products derived from feedstock delivered under its processing agreement with MOC which are said to have been misappropriated by MOC.
2. Background to the dispute
The circumstances in which Glencore delivered oil to MTI at Fujairah and the manner in which the relationship between them developed between 1992 and 1998 are described in my judgment at Phase 2 and do not need to be repeated here. However, it is necessary to say a little more about the nature of Glencore's business operations since they are relevant to the issues that arise in the present case.
Glencore is a Swiss company originally known as Marc Rich & Co. A.G. It had a number of subsidiaries including an English company, Marc Rich & Co. Ltd. Following a management buy-out in 1993 the names of the companies were changed to Glencore International A.G. and Glencore UK Ltd. Mr. Andrew Gibson, who until February 2000 was head of the insurance department, described Glencore in his evidence as a diversified natural resources company involved in the production and trading of metals and minerals, energy products and agricultural products. It is well-known as a trading company dealing in, among other things, crude oil and oil products, grain, sugar, rice and other staple commodities, but its activities are not confined to commodity trading and extend, for example, to the operation of industrial plants.
For many years Glencore has made use of open covers in connection with its commodity trading activities for the purposes of insuring goods in transit. This form of policy, under which goods in transit falling within the terms of the cover are automatically insured as soon as the policyholder acquires an interest in them, provides the flexibility and continuity of cover which are essential to enable a large trading organisation to carry on business in the modern world. Commerce could not function efficiently if traders handling any significant volume of business had to negotiate separate terms for each individual shipment. Open covers also provide benefits for underwriters because they enable large numbers of similar risks to be underwritten without the need for individual presentations.
From the early 1980's Glencore's open cover in respect of oil and oil products was placed in the London market through the brokers Lloyd Thompson (now Jardine Lloyd Thompson). Over the years the policy wording developed in response to changes in the nature of Glencore's business but the underlying philosophy throughout was to procure a broad and flexible contract providing cover against all risks of loss and damage to oil in which Glencore acquired an interest wherever it was situated. As the insurers were aware, Glencore's involvement in the purchase and sale of crude oil and products was solely as a trader; it did not participate either in the production of crude oil or in the final distribution of products.
As might be expected in these circumstances, the contract was worded in very broad terms. It took the form of a marine open cover in favour of Glencore and its associated and subsidiary companies and other interested parties for whom they might receive orders to insure. It covered transit by land, water, air and pipeline from any ports or places in the world to any other ports or places in the world. It covered crude oil, kerosene, gasoil, naphtha, liquid petroleum gases and all products incidental to Glencore's business or otherwise as might be declared. It provided cover on four different bases at the insured's option, that which was most commonly used being based on the American Institute Cargo Clauses. To these basic conditions was added a large number of general conditions dealing with various aspects of the business insured. It will be necessary to refer to some of those in detail at a later stage. Subject to the insured's right to choose the basis of cover, the contract was obligatory on both sides as...
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