Pan Oceanic Chartering Inc. v UNIPEC UK Company Ltd and another

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMrs Justice Carr
Judgment Date10 November 2016
Neutral Citation[2016] EWHC 2774 (Comm)
Date10 November 2016
Docket NumberCase No: CL-2014-000874

[2016] EWHC 2774 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mrs Justice Carr DBE

Case No: CL-2014-000874

Between:
Pan Oceanic Chartering Inc
Claimant
and
Unipec Uk Co. Limited
First Defendant

and

Unipec Asia Co. Limited
Second Defendant

Mr Charles Kimmins QC and Mr Henry Ellis (instructed by Bentleys, Stokes and Lowless) for the Claimant

Ms Philippa Hopkins (instructed by Holman Fenwick Willan LLP) for the First Defendant

Mr Ian Gatt QC and Mr Michael Holmes (instructed by Herbert Smith Freehills LLP) for the Second Defendant

Hearing dates: 6 October, 10–14 October, 17, 19 and 20 October 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.

Mrs Justice Carr Mrs Justice Carr

Summary

1

This judgment is divided into the following sections:

A. Introduction to the parties

B. Introduction to the claim

C. A chronological overview of the facts

D. An overview of the issues

E. The New Jersey law experts

F. Was UHK's reduction and then cessation of nominations under the 2010 WAF COA effected with the predominant motive of retaking control of the brokerage under the 2010 WAF COA?

G. Was there an enforceable brokerage agreement between POC and TI by which TI agreed, amongst other things, to pay POC commission of 1.25% of gross freight, deadfreight and demurrage earned by TI on the 2010 WAF COA?

H. Implied in law promise: UHK

I. Tortious interference with contractual relations: UUK and UHK

J. Quantum

K. Conclusion

Introduction to the parties

2

The Claimant, Pan Oceanic Chartering Inc ("POC"), is a Delaware company domiciled in New Jersey, operating out of offices at 1 Meadowlands Plaza, East Rutherford. It was at all material times engaged in the ship charter brokerage business, assisting in the making of contracts between vessel owners and charterers and providing after-fixture services in connection with the management and operation of the contracts. Mr Mark Ma ("Mr Ma") is POC's chairman and majority shareholder. Mr Peter Guo ("Mr Guo") is POC's vice-president and a minority shareholder.

3

The First Defendant, UNIPEC UK Co. Limited ("UUK"), is an English company and a wholly owned subsidiary of China International United Petroleum & Chemicals Co Ltd ("UNIPEC"). UNIPEC is based in Beijing, China. It was originally a third defendant in this action, but such proceedings were discontinued before service. UUK has its registered office at 74 Lawn House, Shepherd's Bush Green, London. It has its own directors and employees and is UNIPEC's largest subsidiary. It is engaged in the acquisition of crude oil from West Africa and the chartering of vessels to carry the crude oil from West Africa to China. It also acts as a trader of crude oil and petroleum to third parties.

4

The Second Defendant, UNIPEC Asia Co. Ltd ("UHK"), is a Hong Kong corporation and also a wholly owned subsidiary of UNIPEC based outside mainland China with a Hong Kong registered office. It also has its own directors and employees. It is engaged in the acquisition of crude oil largely from the Middle and Far East. It was a contractual counterparty for certain long-term contracts from 2006 onwards. It began to act as a financial settlement centre within the UNIPEC group from May 2011 onwards.

5

UNIPEC in turn is a wholly-owned subsidiary of China Petroleum & Chemical Corporation ("SINOPEC"), based in Beijing. SINOPEC is state-owned and China's largest trading company and one of the largest oil and petrochemical companies in the world. It refines and distributes petroleum products in China. UNIPEC acquires and transports to China crude oil cargoes for SINOPEC's 30 or so refineries, as well as acting as a trader.

B. Introduction to the claim

6

This claim relates to a 3 year renewable contract of affreightment dated 30 th April 2010 between UHK, as charterer, and Tankers International LLC ("TI"), as owner, for West African ("WAF") crude oil cargoes ("the 2010 WAF COA"). The 2010 WAF COA was on an amended ASBATANKVOY form with rider clauses and governed by English law with a London arbitration clause. It provided for a minimum of 8 and a maximum of 11 liftings of Very Large Crude Carrier ("VLCC") cargoes per month. It was on any view a very substantial contract.

7

The 2010 WAF COA identified POC as TI's nominated broker, with reference to 1.25% brokerage commission on freight, deadfreight and demurrage payable by TI to POC. POC contends that this reflected an earlier brokerage agreement reached between POC and TI in October 2009 for the payment to POC of 1.25% brokerage commission on all gross freight, deadfreight and demurrage earned by TI on the 2010 WAF COA ("the brokerage agreement").

8

There is no complaint that UHK did not fulfil its contractual nomination obligations throughout 2010 and into 2011. However, there were only 7 liftings in May, 6 in July, 7 in August, 6 in each of September and October, and 5 in December 2011. In December 2011, January and February 2012, UHK again met the minimum nomination of 8 liftings a month. But in March 2012 it nominated only 6 liftings for April, and as from 12 th April 2012 it ceased nominations altogether. It is common ground that UHK thus acted in breach of the 2010 WAF COA and that POC was deprived of commission from TI as a result. POC describes the breaches as " deliberate and cynical".

9

There is and has been no claim by TI against UHK for such breach. Indeed, it is a striking feature on the facts that TI at no stage pursued UHK for its failure to perform with any real vigour, let alone arbitrated against it. Rather TI and the UNIPEC group continue to do business together.

10

POC, however, brings this claim for damages ranging between US$6.1 million to over US$20million, (depending on the outcome of various issues on quantum). It contends that UHK acted in breach of an " implied in law" promise arising under New Jersey law, whereby UHK agreed to perform the 2010 WAF COA and not to do anything improper or unjustified which would deprive POC of its commissions. It also contends that UUK and UHK intentionally interfered with the brokerage agreement by so ceasing to nominate cargoes. The predominant motive behind these actions was to prevent the payment of commissions to POC under the brokerage agreement and to enable them to effect the payment of equivalent commissions to other brokers by nominating them for the charterparties for the replacement vessels. They knew that the abandonment of the 2010 WAF COA would prevent performance of the brokerage agreement by TI and intended to interfere with TI's performance of the brokerage agreement.

11

POC maintains that UUK and UHK are liable as follows:

a) (Under New Jersey law) for breach of an " implied in law" promise to perform the 2010 WAF COA and not to do anything improper or unjustified which would deprive POC of its commissions (UHK only);

b) (Under New Jersey law) for tortious interference with contractual relations (UUK and UHK).

12

The above represents a far narrower attack than was originally faced by UUK and UHK. Various allegations made by POC have fallen by the wayside, some very late in the day. Thus, by the commencement of trial, POC no longer pursued any claim for punitive damages, nor any claim against UUK for tortious interference with the alleged implied in law promise. During the course of the trial, in response to questions from the court and UUK and UHK, POC stated that it no longer alleged bad faith or actual malice. On the eve of oral closing submissions, POC also withdrew its claim in conspiracy against both UUK and UHK.

13

UUK and UHK say that the two maintained claims are also both bad in law and on the evidence. UUK maintains that it has only ever been a misconceived " anchor" defendant for jurisdictional purposes, enabling POC to bring proceedings against UHK (and originally UNIPEC too) in London. There are substantive disputes as to the applicable law, the outcome of which potentially determine at least the implied in law promise claim outright. There are substantive disputes as to the effect of New Jersey law, even if it applies. As to the facts, UUK and UHK deny any unlawful intentional interference with any brokerage agreement between POC and TI. The reduction and ultimate cessation of nominations under the 2010 WAF COA resulted from changes in the way in which the UNIPEC group procured and shipped crude oil. In particular, the business focus changed from simply acquiring crude oil for SINOPEC's refineries to actively engaging in trading crude oil cargoes. The decisions to act as they did were made in furtherance of the commercial aims of the group and were wholly unrelated to POC's position. A corporate entity that decides to bring its contract with a counterparty to an early end for reasons of commercial efficiency is not answerable to a third party who suffers a loss of expected or hoped for benefit as a consequence of that decision.

C. Background and chronological overview of the facts

14

I set out below an overview of the facts, based on the evidence of the witnesses and the documentary material. Where there are areas of contention, they are identified.

15

Mr Guo was the only witness for POC. For UUK, the following witnesses gave evidence:

a) Ms Jian Meer ("Ms Meer"). Ms Meer has been UUK's operations manager since 2003. She explains her operational role. She had no decision-making powers in relation to the 2010 WAF COA – she did not nominate cargoes to TI or POC, nor did she decide which vessels were acceptable. She did not negotiate freight. Her role was an operations function only. Her evidence was not challenged;

b) Mr Wang Zheng ("Mr Wang"). Mr Wang...

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