Glencore International AG v Metro Trading International Inc. (formerly Metro Bunkering and Trading Co) [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Moore-Bick J |
| Judgment Date | 12 October 2000 |
| Neutral Citation | [2001] EWHC 490 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 October 2000 |
Queen's Bench Division (Commercial Court).
Moore-Bick J.
Alistair Schaff QC and Richard Southern (instructed by Clyde & Co) for Glencore International AG.
Stephen Hofmeyr QC (instructed by Rayfield Mills) for Mobil Export Corp, (instructed by Holman Fenwick & Willan) for Caltex Trading Pte Ltd and (instructed by Hill Taylor Dickinson) for Texaco International Trader Inc.
Steven Gee QC and Michael Davey (instructed by Holmes Hardingham) for the oil purchasers.
Andrew Smith QC and Paul McGrath (instructed by Barlow Lyde & Gilbert) for Metro Trading International Inc.
Andrew Smith QC, Paul McGrath and Rory McAlpine (instructed by Denton Wilde Sapte) for Credit Lyonnais.
The following cases were referred to in the judgment:
Anon (1559)ENRENR Moore (KB) 20, 72 ER 411.
Anziani, ReELR [1930] 1 Ch 407.
Armour v Thyssen Edelstahlwerke AGELR 1986 SLT 452; [1991] 2 AC 339.
Bank voor Handel en Scheepvaart NV v SlatfordELR [1953] 1 QB 248.
Betts and Church v Lee (1810)ENR 5 Johns 348.
Bishopsgate Investment Management v HomanUNK [1995] 1 All ER 347.
Borden (UK) Ltd v Scottish Timber Products LtdELR [1981] Ch 25.
Cammell v SewellENRENRENR (1858) 3 H & N 617, 5 H & N 728; 157 ER 615, 1371.
Case of Leather (1489–90) YB 5 Hen VII fol 15.
Castrique v ImrieELR (1870) LR 4 HL 414.
Chaigley Farms Ltd v Crawford, Kaye & Grayshire LtdUNK [1996] BCC 957.
Clarke v DunravenELR [1897] AC 59.
Clough Mill Ltd v MartinWLR [1985] 1 WLR 111.
Coleman v Harvey [1989] 1 NZLR 723.
Curtis v GroatENR (1810) 6 Johns 169.
Farnsworth v Federal Commr of TaxationUNK (1949) 78 CLR 504.
Foskett v McKeownELR [2001] 1 AC 102.
Goldcorp Exchange Ltd, ReELR [1995] 1 AC 74.
Hallett's Estate, ReELR (1880) 13 Ch D 696.
Hardwick Game Farm v Suffolk Agricultural Poultry Producers AssociationWLR [1966] 1 WLR 287.
Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick LtdWLR [1984] 1 WLR 485.
Indian Oil Corp Ltd v Greenstone Shipping SA (Panama)ELR [1988] QB 345.
Inglis v RobertsonELR [1898] AC 616.
International Banking Corporation v Ferguson, Shaw & SonsENR [1910] SC 182.
Jones v De MarchantUNK (1916) 28 DLR 561.
Kahler v Midland Bank LtdELR [1950] AC 24.
MacMillan Inc v Bishopsgate Investment Trust (No. 3)WLR [1996] 1 WLR 387.
Mercer v Craven Grain Storage Ltd [1994] CLC 328.
Nelson v Brown, Doty & Co (1880) 44 Iowa 555.
North Western Bank v Poynter, Son & MacDonaldsELR [1895] AC 56.
Oatway, ReELR [1903] 2 Ch 356.
Roscoe (James) (Bolton) Ltd v WinderELR [1915] 1 Ch 62.
Sandeman & Sons v Tyzack & Branfoot Steamship CoELR [1913] AC 680.
Savage v Salem Mills Co (1906) 85 Pac 69.
. Silsbury & Calkins v McCoon & Sherman (1850) 3 NY 379.
South Australian Insurance Co v RandellELR (1869) LR 3 PC 101.
Spence v Union Marine Insurance Co LtdELR (1868) LR 3 CP 427.
Stock v StockENR (1594) Poph 37.
Tallinna Laevauhisus A/S v Estonian State Steamship LineUNK (1947) 80 Ll L Rep 99.
Winkworth v Christie, Manson & Woods LtdELR [1980] 1 Ch 496.
Zahnrad Fabrik Passau GmbH v Terex Ltd 1986 SLT 84.
Zivnostenska Banka National Corp v FrankmanELR [1950] AC 57.
Contractx — Conflict of laws — Sale of goods — Bailment — Oil storage and trading company in Fujairah became insolvent with a deficiency of oil — Claims to remaining oil by unpaid suppliers, banks and purchasers — Proceedings to determine issues of law relating to passing of title to oil — Whether passing of property determined by law of Fujairah/UAE as lex situs or proper law of contracts — Passing of property and ownership of commingled and blended bulks under law of Fujairah/UAE and under English law — Effect of unauthorised mixing and sale — Whether purchasers acquired good title — Effect of wrongful withdrawal by bailee from mixed bulk.
This was phase 1 of what was known as the “Metro litigation” which arose out of the collapse in 1998 of an oil storage facility operated in Fujairah by Metro Trading International Inc (“Metro”), formerly known as Metro Bunkering and Trading Co.
Metro operated an oil storage facility in Fujairah and was involved in buying, blending and selling fuel oil either to vessels as bunker fuel or to oil traders as cargoes or part cargoes of fuel oil. Metro used four large vessels off Fujairah as floating storage tanks. Although its operations took place in Fujairah its head office was in Athens. Glencore and others delivered oil products to Metro for storage. In 1998 Metro became insolvent. An inventory showed that Metro then held far less oil than depositors calculated it should have done. Glencore and others (“the oil claimants”) asserted proprietary claims to the remaining oil held by Metro. In order to preserve the oil and dispose of it in an orderly way, Tuckey J made a receivership order under which the remaining oil was sold and the proceeds held for the benefit of the competing claimants. Metro's business was financed by a number of banks who claimed to be entitled to charges over the proceeds of sale and the oil in storage. The banks' claims together exceeded the amount in the hands of the receivers. Some purchasers of oil from Metro had failed to make payment and had been joined as defendants. Their case depended on Metro's ability to give good title to the oil in its possession. Rix J directed that the litigation should be disposed of in phases each dealing with a limited group of issues. Phase 1 dealt with issues relating to the passing of title to the oil which remained in Metro's possession and the oil which Metro had delivered to purchasers before it became insolvent. Phase 1 was intended to answer (on assumed facts) the questions what system of law governed the transfer of title to oil delivered by the oil claimants to Metro and by Metro to the purchasers and any non-contractual liabilities which Metro and the purchasers might have incurred to the oil claimants, and what were the relevant rules of the law of Fujairah and of English law.
Held, ruling accordingly:
1. Authority established that the law governing the transfer of moveable property was the law of the place where the goods were. (Cammell v SewellENR(1858) 3 H & N 617andHardwick Game Farm v Suffolk Agricultural Poultry Producers AssociationWLR[1966] 1 WLR 287applied.)
2. Although there was no authority dealing directly with the passing of property between two contracting parties, the better view was that the lex situs rule continued to apply because it was necessary that there should be a rule of general application to facilitate international trade and because practical control over moveables could ultimately only be regulated by the state in which they were situated. The proper law of the transaction was relevant so far as the lex situs recognised it. Any absence of good faith was a matter for the lex situs, subject only to the right of the English court to refuse to recognise a transfer on well-established public policy grounds if it regarded the effect as morally repugnant. No such grounds had been pleaded. The lex situs applied to the creation or acquisition of a new title as it applied to transfer of title. Therefore the questions as to who, as between Metro and the respective oil claimant, acquired, retained or lost title to the oil upon and after its arrival in Fujairah was governed by the law of Fujairah as the lex situs of the oil. (Zahnrad Fabrik Passau GmbH v Terex Ltd1986 SLT 84andWinkworth v Christie Manson & Woods LtdELR[1980] Ch 496 considered.)
3. Claims by the oil claimants against Metro were governed by the proper law of the contract, which in most cases was English law. Any related tort claims were to be determined by reference to the same law as the proper law of the contract under s. 12 of the Private International Law (Miscellaneous Provisions) Act 1995.
4. Under the law of Fujairah (which for these purposes was the law of the UAE) questions arising between Metro and the oil claimants in relation to title to the relevant oil were governed by the law of the UAE as the lex situs. However to the extent that in determining such questions the law of the UAE sought to give effect to the parties' intentions as expressed in a contract between them, the law of the UAE would apply the proper law of the contract in order to ascertain their intentions.
5. As between the oil claimants and the purchasers, questions of title were governed by the law of Fujairah as the lex situs. That was so even though the contracts under which the purchasers bought bunkers from Metro contained an express choice of English law and jurisdiction. If the intentions of the parties were relevant to the passing of property, the law of Fujairah would have regard to the proper law of the contract in determining those intentions. The tort claims between those parties were also governed by the law of Fujairah by virtue of s. 11 of the Private International Law (Miscellaneous Provisions) Act 1995.
6. Under art. 992 of the UAE Civil Code if the property bailed was a sum of money or a thing which could be destroyed by use and the bailor permitted the bailee to use it, the contract was one of loan (“qardh”) under which the lender transferred property in the goods to the borrower and the borrower was not obliged to return the goods in specie. Article 992 was limited to the case in which the bailor gave the bailee permission to consume the property deposited with him. It did not deal with the situation in which he gave the bailee permission to sell the property. Although “use” in art. 992 did not include legal consumption, it was capable of covering any form of ordinary use which involved physical consumption, such as burning fuel. Mixing or commingling of oil of the same specification did not involve use in the sense of art. 992 and there was no passing of property unless the parties so intended, whereas blending of oil of different specifications was within art....
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