North Sea Energy Holdings N.v v Petroleum Authority of Thailand
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,LORD JUSTICE WARD,LORD JUSTICE ROCH |
| Judgment Date | 16 December 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J1216-11 |
| Docket Number | QBCMF 97/0699/CM3 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 December 1998 |
[1998] EWCA Civ J1216-11
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
(MR JUSTICE THOMAS)
Royal Courts of Justice
Strand
London WC2
Lord Justice Roch
Lord Justice Ward
Lord Justice Waller
QBCMF 97/0699/CM3
MR M PICKERING QC and MR M TSELENTIS and MR C KIMMINS (instructed by Messrs Gouldens) appeared on behalf of the Plaintiff/Appellant.
MR V V VEEDER QC and MR S BERRY (instructed by Messrs Lovell White Durrant) appeared on behalf of the Defendant/Respondent.
JUDGMEVT
(Approved by the Court)
Wednesday 16 December 1998
Introduction
This is an appeal from the decision of Thomas J given on 25 March 1997 now reported in [1997] 2 L.L.Rep. 418, and page references in this judgment will be to that report. He gave judgment in favour of North Sea Energy Holdings NV (MSH) on the basis that Petroleum Authority of Thailand (PTT) had repudiated a contract for the purchase of oil but awarded nominal damages only. MSH have appealed against the judge's decision to award them nominal damages only and PTT have put in a respondent's notice challenging the judge's finding that there was a repudiation of the contract. PTT have however made clear through their counsel Mr Veeder QC that they were not concerned to argue any point on the respondent's notice if the appeal against the decision of the judge awarding nominal damages were dismissed. In that context Mr Veeder identified in his written submissions, what he described as a threshold point. That point related to the question whether there should be implied into the contract between MSH and PTT an obligation to supply certain information. That that might be a threshold point was already apparent, at least in substantial degree by virtue of the fact that it was the first point argued by Mr Murray Pickering QC on behalf of MSH. However, although inclined to feel that it was close to being a threshold point, Mr Pickering, quite understandably in the light of the arguments of Mr Tselentis which were to follow, would not concede that the point simpliciter was a threshold point. In the result we heard some further argument by Mr Pickering.
Mr Tselentis then followed and developed points of his own including a submission that even in the absence of an implied term, MSH were entitled to damages assessed on the basis of a loss of a chance. During Mr Veeder's oral submissions it became clear that the points relating to whether a term should be implied into the contract, when taken together with Mr Tselentis's argument as to the proper basis on which the court should approach the question of damages in the absence of such an implied term, did provide a threshold issue which would dispose of the appeal if the court was in favour of PTT. At the conclusion of Mr Veeder's submission on these aspects we informed Mr Pickering and Mr Veeder that we had provisionally formed the view that there was a threshold issue and had provisionally formed the view that PTT were entitled to succeed on that issue. Mr Veeder confirmed that his clients were not concerned to pursue the respondent's notice or any other points if the court were to be in their favour on the threshold issue. It was thus indicated to the parties that argument should be limited to the threshold issue and Mr Pickering was invited to respond to that issue. Mr Pickering was further asked whether he accepted that there was a threshold issue and ultimately, having had an opportunity to consult with his clients, he accepted that there was.
At the conclusion of the argument, since we were unanimously of the view that the threshold issue must be decided in PTT's favour, we so announced to the parties thus saving some further days of argument, and this judgment can be limited to the threshold issue.
Background
It is necessary to spell out the background in some detail in order to explain the threshold issue, and to establish why it is a threshold issue.
The facts as found by the judge are not challenged so far as the threshold issue is concerned and I can accordingly summarise the facts from the findings in his judgment.
PTT is a state enterprise wholly owned by the Government of Thailand. Its function is to buy and sell oil and oil products. It owned 49% of Thai Oil Co. (Thai Oil) which had an oil refinery at Bangkok, and PTT had an arrangement with Thai Oil under which Thai Oil would refine 25,000 barrels of Middle Eastern Oil a day for PTT.
MSH was formerly known as Midland and Scottish Holdings NV hence the abbreviation used. It was formed in March 1993 at the instigation of Mr Deaner, chairman of Midland and Scottish Resources Plc (MSR), for the purpose of entering into any agreement that might be negotiated with PTT, arising out of discussions which had taken place between Mr Jewitt, acting for MSR, with PTT. Originally on 13 May 1993 Mr Deaner on behalf of MSH provided to PTT a formal offer to supply 70 million barrels of Emerald Field oil over a five year period (MSR being the operator of the Emerald Oil Field in the North Sea). But that offer was turned down by PTT on the basis of cost and suitability for refining which led to negotiations for the supply of Middle Eastern crude oil. It was these negotiations which led to the conclusion on 23 July 1993 of the contract relevant to this appeal, between MSH and PTT for the supply over a 5 year period at a discount of U.S. 15 cents per barrel from the official price of 70 million barrels of Saudi Arabian crude oil.
Before coming to the detail of the agreement it is important to set it in its factual context. The full detail appears from the judge's judgment at 421, and I merely select the critical points.
From 1988 a Saudi Arabian government controlled company called Saudi Aramco controlled the export and marketing of all Arabian light and heavy crude oil. By 1993 Saudi Aramco had developed a policy of selling only to the major oil companies and end users i.e. (those companies which had refineries or processing agreements, and would therefore receive and refine the crude oil at the designated refinery or facility). Even though Saudi Arabian oil could be purchased from the major oil companies, that was subject to the permission of Saudi Aramco. Since Saudi Aramco controlled the only oil terminals for the shipment of Arabian Crude (at Ras Tanura and Ju'aymah), it was able to enforce its policy to sell to end users only.
In addition to controlling sales to end users Saudi Aramco set its prices by reference to the region of destination of the cargo. The price for an Eastern destination (Asia/Far East) was different from that for Europe. Saudi Aramco would not permit switching, which, if allowed, might have enabled someone simply to make a profit out of the price difference.
It was thus Saudi Aramco's policy to impose destination restrictions on each customer that purchased oil. It made this policy effective by imposing terms that entitled it to see discharge certificates when a vessel returned to Ras Tanura or Ju'aymah, and imposing sanctions on any person who breached the end user or destination restrictions.
The fact that Saudi Aramco had the policy of imposing end user and destination restrictions was known to both MSH and PTT. However, (and this is an important finding), PTT did not know of Saudi Aramco's policy in great detail. PTT simply had a general knowledge that there were imposed end user and destination restrictions; they also believed, as did MSH, that it was possible to obtain relaxations, but did not know how this could be achieved. The fact that the end user and destination restrictions might be imposed was an important factor in the negotiations between PTT and MSH because they both knew that PTT's refining capacity with Thai Oil might not even in relation to the first year's supply be able to handle the quantity of oil that MSH was to deliver under the proposed contract. The judge put the matter this way:—
"… the evidence before me establishes that PTT had at the time the agreement was made only a general knowledge that there were end user and destination restrictions; they believed that it was possible to obtain relaxations, but did not know how this was to be achieved. However the fact that Saudi Aramco imposed end user and destination restrictions was an important factor in the negotiations because both PTT and MSH knew that PTT's refining capacity with Thai Oil might not, even in the first year's supply, be able to handle the quantity of oil that MSH was to deliver. Thai Oil's existing capacity contracted to PTT for Middle Eastern crude was then 25,000 barrels a day (with a 10 percent margin either way); the agreement between PTT and MSH in the first year envisaged a supply of 27,500 barrels a day and an increase in each year thereafter. PTT also had a 36 percent shareholding in Bang Chak Refinery, but it was not suitable for refining Arabian crude oil at that time. PTT was also involved in joint ventures for two further refineries but these were not to be on stream until 1996. MSH also was told that PTT did not have any existing refinery facilities outside of Thailand. It was also apparent to both PTT and MSH that, as PTT did not own any refining capacity, any breakdown or unavailability of Thai Oil's refining capacity would produce a problem for PTT in accepting delivery of the oil if the destination of the cargo was restricted by Saudi Aramco to Thailand. They needed what Mr Jewitt described as a "safety...
To continue reading
Request your trial
-
Golden Strait Corp. v. Nippon Yusen Kubishka Kaisha, (2007) 368 N.R. 324 (HL)
...m.b.H., [1993] 2 Lloyd's Rep. 1, refd to. [paras. 17, 34, 79]. North Sea Energy Holdings NV v. Petroleum Authority of Thailand, [1999] 1 Lloyd's Rep. 483, refd to. [paras. 18, 33]. Dampskibsselskabet Norden A/S v. Andre & Cie SA, [2003] EWHC 84 (Comm. Ct.), refd to. [para. 20]. Dampskib......
-
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (the "Golden Victory")
...13) "crystallises the position so far as the basis of a capital award of damages is concerned". 18 The buyers in North Sea Energy Holdings NV v Petroleum Authority of Thailand [1999] 1 Lloyd's Rep 483 repudiated an oil purchase agreement and the sellers accepted their repudiation. The sell......
-
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [QBD (Comm)]
...1981 Law Quarterly Review, the key authorities are, I think, The Mihalis Angelos, The Elena d'Amico, North Sea Energy Holdings v PTT [1999] 1 Lloyds Rep 483 and The 15 Before turning to those authorities, I propose simply to summarise what in my judgment is the relevant effect of the other......
-
Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas)
...seems to me that the authoritative phrase “extravagant or unusual” is equal to the situation (see, for instance, North Sea Energy Holdings v. Petroleum Authority of Thailand [1997] 2 Lloyd's Rep 418). A contract at other than market prices, where the market price is relevant, is liable to b......