Integral Petroleum SA v Petrogat Fze
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 12 March 2020 |
| Neutral Citation | [2020] EWHC 558 (Comm) |
| Date | 12 March 2020 |
| Docket Number | Case No: CL-2019-000023 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 558 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Rolls Building
Fetter Lane,
London, EC4A 1NL
Mr Justice Foxton
Case No: CL-2019-000023
and
Guy Blackwood QC (instructed by Vitaliy Kozachenko) for the Claimants
Chris Smith QC (instructed by Stephenson Harwood ME LLP) for the Third Parties
Hearing dates: 10, 11 and 12 February 2020
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.
This is the hearing of the Claimant's (“Integral's”) application to commit the Second Third Party, and the Third Third Party, to prison for contempt of court.
Integral was represented before me by Mr Blackwood QC and the Third Parties by Mr Smith QC. I am very grateful to them for their submissions, in a hearing which I suspect involved significant logistical challenges for both of them.
At the start of the hearing, applications for committal were also pursued against the First and Fourth Third Parties. However, after the evidence had been completed, Mr Blackwood QC for Integral confirmed that the application would not be pursued against those parties.
A The background
A1 The parties
Integral, the First Defendant (“Petrogat”) and the Second Defendant (“San Trade”) are oil trading companies based in Geneva, the UAE and Germany respectively.
The Second Third Party (“Ms Sanchouli”) is an Iranian national. It is her evidence that she oversaw the day-to-day business of both Defendants, together with her father (“Mr Sanchouli”) who is the Third Third Party.
The First Third Party (“Mr Sonnenberg”) was at all relevant times the sole director of San Trade. The Fourth Third Party (“Mr Beisenov”) was the sole director and owner of Petrogat.
A2 The underlying commercial transaction
The committal application arises out of a contract for the sale of oil concluded between Integral as buyer and Petrogat as seller on 16 September 2017 (“the Contract”). The Contract was for the purchase of 20,000 MT (+/- 10%) of Medium Sulphur Fuel Oil (“MSFO”), and 40,000 mt (+/- 10%) of Low Sulphur Fuel Oil (“LSFO”). The MSFO and LSFO were to be sourced from the Seyedi Refinery in Eastern Turkmenistan (“the Refinery”).
San Trade guaranteed Petrogat's obligations under the Contract by a guarantee letter dated 30 September 2017, a guarantee agreement dated 8 November 2017 and a guarantee agreement dated 22 December 2017 (collectively “the Guarantees”).
The Contract provided for delivery FOB Turkmenbashi Ferry (Western Turkmenistan). Integral was to make partial pre-payments of US$1.5m for the MSFO and $3m for the LSFO, and title was to pass as the product passed the permanent flange at the railway tank car (“RTC”) loading place.
Difficulties arose in relation to loading the LSFO cargo, for reasons which it is not necessary to determine. The parties agreed in the course of a series of telephone conversations between 1 and 3 November 2017 that $1m would be paid by Integral to the Refinery for MSFO, until deliveries of MSFO to that value had been made by the Refinery to Integral, at which point another $1m would be paid for MSFO, with this process continuing until the full 18,000 mt of MSFO had been delivered.
There was a dispute between the parties as to whether, in assessing what amount of the prepayment had been utilised, regard was to be had to the price under Petrogat's contract with the Refinery (as Integral contended) or the price under the Contract (as the Defendants contended). That dispute was ultimately determined in Integral's favour by the award of an LCIA arbitration tribunal (“the LCIA Award”).
The first payment of $1m was made to the Refinery on 14 November 2017, and the second $1m on 27 December 2017. By 31 December 2017, some 8,999 mt of MSFO had been loaded (approximately half of the quantity of MSFO provided for in the Contract). Railway bills of lading were issued for the loaded cargo by the Railways Ministry of Turkmenistan (“the Railways Ministry”). These stated that the cargo had been consigned to Integral and they identified the place of delivery as Georgia, which was Integral's nominated destination.
By 31 December 2017, the parties were in dispute as to whether the pre-payments were sufficient to cover all of the 138 RTCs which had been loaded by that point. It is the Defendants' case that, against this background, they decided to hold back some of the 138 RTCs to cover the amounts for which Integral had yet to make payment. It was Integral's case, on which it ultimately prevailed in the LCIA Award, that it had acquired title to the MSFO in all the RTCs.
It is common ground that the Defendants gave the Railways Ministry instructions to amend the bills of lading for 72 RTCs, to provide for the delivery of those RTCs to San Trade and to change the destination of the cargo from Georgia to Bandar Abbas, Iran. It was Integral's case that this change was effected by San Trade providing a forged letter to the Railways Authority which purported to record Integral's consent to the amendments, when in fact Integral had approved no such letter and had not consented to the changes. The Defendants say that no such forged letter was produced, and that San Trade made it clear that it was requesting the change because it was in dispute with Integral.
Integral says it learned through its representatives in Turkmenistan that a substantial part of its cargo was being diverted to Iran. It wrote to San Trade and Petrogat urging them to confirm that the cargo would be shipped to Integral and would in no circumstances be shipped to Iran. There was no response to this correspondence and no such confirmation was given.
Accordingly, Integral applied ex parte on notice for injunctive relief (serving the papers on Petrogat and San Trade over the weekend). Following a hearing on the evening of Saturday 13 January 2018, Morgan J granted an injunction which was sealed the following day, and which provided as follows:
“(1) The First and Second Defendants shall take no steps whatsoever to direct delivery of the cargo to Iran or elsewhere and shall take no steps whatever in relation to the Cargo save for those identified in paragraph (2).
(2) Both of the Defendants shall by 12.00 hours local time in Turkmenistan on Sunday 14 January 2018 sign by a duly authorised representative a letter in the form of the draft attached hereto as Schedule C and provide such signed letters to the Claimant's solicitors as soon as signed”.
I will refer to this order as “the Morgan Injunction”.
The letter in question required San Trade and Petrogat to state that:
“It has come to our knowledge that someone purporting to be a representative of San Trade GmbH wrote to Turkmen Railways on or before 12 January 2018 seeking to give instructions on behalf of Integral Petroleum SA to the effect that the cargo be sent to Iran.
The cargo must not be sent to Iran in any circumstances and must either be delivered to Parto Tskali / Khobi Kulveli via Azerbaijan in accordance with the terms of the unamended bills of lading or alternatively should be preserved pending a further order from Integral Petroleum SA or an order of the Court or Arbitration Tribunal in the competent jurisdiction (England and Wales)”.
The Morgan Injunction, which contained the appropriate form of penal notice, was served on Petrogat, San Trade, Ms and Mr Sanchouli and Mr Sonnenberg, together with accompanying correspondence informing them of what they needed to do to comply with its terms. However, it is common ground that no letter in the required form was signed within the deadline imposed by Morgan J or at any time prior to 29 January 2018. On 18 January 2018, in the absence of compliance, Integral served a copy of the injunction on two further individuals, Ms Lobis and Mr Beisenov, who were asked to sign the Schedule C letter. There was still no response.
On 24 January 2016, two days before the return date, Stephenson Harwood Middle East LLP came on the record for both Defendants and served evidence in support of an application to discharge the injunction on various grounds. Integral served reply evidence on the day of the hearing. When the matter came on before His Honour Judge Waksman QC, he adjourned the hearing in view of the late flurry of evidence. At the hearing, Mr Stephen Cogley QC, counsel for the Defendants, informed the Court that the cargo was “almost certainly going to Iran in any event …. over the weekend” and that “the [Schedule C letter] would not make any difference”.
His Honour Judge Waksman QC continued the injunction pending the adjourned return date, but paragraph (2) was varied as follows:
“Both of the Defendants shall forthwith sign by a duly authorised representative a letter in the form of the draft attached hereto as Schedule C (as amended by the order of His Honour Judge Waksman QC dated 26 January 2018) and provide such signed letters to the Claimant's solicitors as soon as signed”.
The terms of the draft letter in Schedule C were also amended to provide:
“The cargo must not be sent to Iran in any circumstances and should be preserved in its present location pending a further order from the Court or Arbitral Tribunal in the competent jurisdiction (England and Wales)”.
I will refer to the order as varied by His Honour Judge Waksman QC as “the Waksman Injunction”.
The Defendants did not provide a letter in the revised form of Schedule C until 29 January 2018, when...
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