National Bank of Abu Dhabi Pjsc v BP Oil International Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mrs Justice Carr DBE,Mrs Justice Carr |
| Judgment Date | 18 November 2016 |
| Neutral Citation | [2016] EWHC 2892 (Comm) |
| Docket Number | Case No: CL-2016–000140 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 November 2016 |
[2016] EWHC 2892 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mrs Justice Carr DBE
Case No: CL-2016–000140
Mr Rhodri Davies QC and Mr Nicholas Sloboda (instructed by Slaughter and May) for the Claimant
Mr Bankim Thanki QC and Mr Christopher Lewis (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing date: 7th November 2016
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.
Introduction
This is a claim by the Claimant, National Bank of Abu Dhabi PJSC ("NBAD"), for compensation for breach of warranty and representation against the Defendant, BP Oil International Limited ("BP"). Judgment is sought in the sum of US$68,881,854.62 plus interest.
NBAD, a commercial bank, purchased from BP 95% of a receivable due to BP pursuant to a Purchase Letter dated 3 rd September 2014 ("the Purchase Letter"). The receivable was a debt owed to BP by a Moroccan oil-refining company, Société Anonyme Marocaine de L'Industrie de Raffinage ("SAMIR") in respect of an oil consignment ("the Receivable"). The Purchase Letter represented a form of non-recourse receivables financing under which BP transferred almost all of the credit risk of SAMIR failing to make payment to NBAD and received a cash advance in respect of the Receivable in advance of the date on which the underlying invoice was due for payment.
By the Purchase Letter BP agreed, amongst other things, that by selling 95% of the Receivable it had assigned to NBAD " in equity irrevocably" the purchased part of the Receivable. BP also went on to represent and warrant to NBAD that it was:
"…not prohibited by any security, loan, or other agreement… from disposing of the Receivable evidenced by the Invoice as contemplated herein and such sale does not conflict with any agreement binding on [BP]."
Under the Purchase Letter, BP was to reimburse NBAD for a specified sum if any such representation or warranty was breached.
NBAD duly paid for the Receivable. However, SAMIR went into insolvency proceedings in or around late November 2015 and NBAD has received no payment. In the course of pursuing the matter with BP, and in particular the question of assignment, NBAD discovered the existence of a prohibition on assignments in the terms of the sale and purchase agreement between BP and SAMIR.
There is a single issue of interpretation to be resolved, namely whether or not the existence of this prohibition means that the representation given by BP to NBAD in the Purchase Letter as set out above was false. NBAD contends that it was; BP contends that it was not.
By agreement between the parties and as approved by the Court, the action, which was commenced on 4 th March 2016, has proceeded under the pilot for the Shorter Trials Scheme (see CPR PD51N), resulting in a one day hearing on 7 th November 2016. There has been very limited disclosure and there are no witness statements and there has been no oral evidence. The parties and their lawyers are to be congratulated for the co-operative spirit in which the litigation has been conducted which has resulted in an effective and speedy process, all as envisaged by the Shorter Trials Scheme. The total costs of the action on each side are estimated to be approximately £350,000. This judgment has been handed down within two weeks of the hearing.
Background
On 9 th December 2013 BP and SAMIR entered into an Agreement for the Sale and Purchase of Crude Oil which was expressly subject to English law ("the BP/SAMIR Agreement"). Under the BP/SAMIR Agreement the parties agreed to enter into a series of sales and purchases in accordance with the terms and conditions set out in the BP/SAMIR Agreement. Payment was due some two months after delivery. By clause 14, BP's (lengthy) General Terms and Conditions for Sales and Purchases of Crude Oil (2007 edition) ("BP's General Terms and Conditions") were incorporated. Section 34 of BP's General Terms and Conditions ("section 34") provided:
"Section 34 – Limitation on Assignment
Neither of the parties to the Agreement shall without the previous consent in writing of the other party (which shall not be unreasonably withheld or delayed) assign the Agreement or any rights or obligations hereunder. In the event of an assignment in accordance with the terms of this Section, the assignor shall nevertheless remain responsible for the proper performance of the Agreement. Any assignment not made in accordance with the terms of this Section shall be void."
Thus, written consent to assignment was required, and failure to comply with this requirement wholly invalidated any assignment. There was an exception in the confidentiality provisions in the body of the BP/SAMIR Agreement allowing for its disclosure where agreement to assign in accordance with section 34 was obtained.
The BP/SAMIR Agreement was therefore a large-scale "umbrella" agreement under which individual transactions would then take place. One such transaction, and the transaction underlying the Purchase Letter, was the sale by BP to SAMIR of 100,000 metric tonnes of Russian Export Blend crude oil (plus or minus 10% Seller's operational tolerance) at a price of Brent plus US$0.45 per US barrel pursuant to an addendum to the BP/SAMIR Agreement which has been treated as dated 16 th January 2014. The invoice was to be based on the bill of lading quantity. The bill of lading was dated 5th August 2014 and showed a quantity of 99,937.054 metric tonnes (net in vac), equating to 722,205 US barrels, as reflected in BP's invoice dated 29th August 2014, showing an invoice value of US$72,507,215.39.
On 12 th August 2014 BP and NBAD entered into a Payment Guarantee Agreement (no. TF141015) ("the Guarantee") in relation to the BP/SAMIR Agreement. By clause 2 of the Guarantee, which was again expressly subject to English law, NBAD agreed to guarantee payment by SAMIR to BP in an amount of 95% of the Estimated Cargo Value or the full final invoice value, subject to a maximum liability of US$75m. In exchange for that guarantee, BP paid a commission fee of 4.5% p.a., payable for the number of days between the discharge date and the earliest of a) the date payment in full was received by BP from SAMIR; b) the date a Demand was made under the Guarantee; and c) the Expiry Date (which was 29th January 2015, unless extended).
BP also gave certain undertakings under the Guarantee. These included as follows in the event of a payment by NBAD under the Guarantee (at clause 6.1):
"(a) to promptly pay to [NBAD] a proportion of any amounts subsequently recovered from [SAMIR] under the Contract which proportion shall be equal to the proportion of the Payment as against the Shortfall;
(b) to promptly pay to [NBAD], a proportion of any interest for late payment recovered from [SAMIR] which proportion shall be equal to the proportion of the Payment as against the Shortfall;
(c) where possible under any applicable laws and the Contract, to promptly assign (at its own expense) to [NBAD], following a request from [NBAD], all [BP]'s rights under the Contract to the extent of any payment made by [NBAD] to [BP] under Clause 5 and not subsequently paid under Clause 6.1(a) or Clause 6.1(b) and to do all things reasonably necessary to achieve such assignment; and
(d) if assignment under Clause 6.1(c) is not possible or effective for any reason, that [NBAD] shall be subrogated to [BP]'s rights in respect of the Delivery under the Contract and [BP]'s rights in respect to the payment undertaking up to the amount paid by [NBAD] and to take legal proceedings against [SAMIR] under the Contract/payment undertaking to the extent of any such payment made by [NBAD] under Clause 3 [sic] and not subsequently paid under Clause 6.1(a) or Clause 6.1(b), upon [NBAD] agreeing to meet its proportionate share of [BP]'s reasonable instructions received by [BP] from [NBAD]."
Annexed to the Guarantee was the Form of Demand which BP was to use in the event of a claim under clause 5.2 of the Guarantee. This made provision for a possible assignment (in accordance with clause 6.1(c)), as follows:
"In consideration of you [NBAD] agreeing to pay the amount demanded to us [BP] in accordance with the Agreement, and to the extent legally possible, including for the avoidance of doubt any contractual restriction on assignment in the Contract, we hereby assign to you up to an amount equal to [NBAD's] Share of our rights and interest in relation to the Delivery under:
(i) the Contract;
(ii) our invoice to [SAMIR] in respect of the Delivery under the Contract;
(iii) the bill of lading or the inspector's report or the vessel nomination or a letter of indemnity to [SAMIR] under [the] Contract; and
(iv) if a Verdict has been issued and a copy is available, the Verdict in our favour."
In its written submissions BP points to the fact that at the date of the Guarantee both parties expressly contemplated and made distinct provision for the possibility that there might be a prohibition against or restriction on the assignment of rights under the BP/SAMIR Agreement. Whilst the Guarantee is admissible context (see HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] EWCA Civ 735, [2001] 2 All ER (Comm) 39, at [83]), I have gained no material assistance from its terms for the purpose of construing the Purchase Letter. Even ignoring the fact that the Guarantee imposed a quite different legal obligation on quite different terms (in that, for...
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