Septo Trading Inc. v Tintrade Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Teare,Mr. Justice Teare |
| Judgment Date | 08 July 2020 |
| Neutral Citation | [2020] EWHC 1795 (Comm) |
| Date | 08 July 2020 |
| Docket Number | Case No: CL-2018-000814 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 1795 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: CL-2018-000814
Robert Bright QC and Sarah Martin (instructed by Allen & Overy LLP) for the Claimant
Michael Ashcroft QC and Oliver Caplin (instructed by HFW) for the Defendant
Hearing dates: 8–11 June 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 a dispute between the Buyer and Seller of a cargo of fuel oil loaded on board the vessel NOUNOU at the port of Ventspils in Latvia in July 2018. The Buyer, Septo Trading Inc (of the BVI), claims that the cargo was off-spec and seeks an award of damages in the sum of US$7,785,478. The Seller, Tintrade Limited (of Jersey), denies that the cargo was off-spec and says that the damages claimed have been exaggerated.
There are essentially three issues. First, is the Buyer prevented from arguing that the cargo was off-spec by reason of an independent certificate of quality issued at the loadport ? If not, was the cargo off-spec ? If so, what damage was suffered by the Buyer?
As a result of the Covid 19 crisis the trial was conducted entirely remotely with factual and expert witnesses giving their evidence by video-link. I am very grateful to the parties, their legal representatives, the witnesses and my clerk for making this remote trial possible.
The sale and purchase contract
The contract is evidenced by the “Recap” dated 20 June 2018 which recorded the terms agreed. The product was described as “high-sulphur fuel oil RMG 380 as per ISO 8217:2010”. The quantity was 36,000 – 42,000 mt in Buyer's option and delivery was to be “in one cargo lot, fob one safe berth, one safe port Tallin or Ventspils, for loading on board M/T NOUNOU during the period 1–3 July 2018”.
ISO 8217:2010, which deals with marine fuels, provides by clause 5.1 that the fuel shall conform to the characteristics and limits given in Table 1 or Table 2 as appropriate, when tested in accordance with the methods specified. Table 2, dealing with residual fuels, is the appropriate table and provides that “total sediment aged” shall not exceed 0.1%. Clause 5.2 provides that the fuel shall be “a homogenous blend of hydrocarbons derived from petroleum refining”.
The clause in the Recap entitled “Determination of Quality and Quantity” provided as follows:
“As ascertained at loadport by mutually acceptable first class independent inspector, or as ascertained by loadport authorities and witnessed by first class independent inspector (as per local practice at time of loading).
Such result to be binding on parties save fraud or manifest error.
Inspection costs to be shared 50/50 between Buyer/Seller.”
The clause entitled “Title and Risk” provided as follows:
“Property in the product delivered hereunder, and all risks in relation thereto, shall pass from the Seller to the Buyer at the loadport as the product passes the flange connection between the loading hoses and the vessel's permanent hoses.”
The clause entitled “General” provided as follows:
“Where not in conflict with the above, BP 2007 General Terms and Conditions for fob sales to apply.”
The BP terms contain 41 sections and 8 schedules. Of relevance to the present case is, in particular, section 1, entitled “Measurement and sampling, independent inspection and certification.” Section 1.1 provides as follows (so far as is material):
“1.1 Measurement and Sampling
Measurement of the quantities and the taking of samples and analysis thereof for the purposes of determining the compliance of the Product with the quality and quantity Provisions of the Special provisions shall be carried out in the following manner:
……………
1.1.2 Where the Loading Terminal is not operated by the Seller:
(i) By an independent inspector jointly agreed upon by the Buyer and Seller in accordance with current Approved Industry Practice. All charges of the independent inspector shall be shared equally between the parties and the inspector's report shall be made available to both parties. The Seller shall use all reasonable endeavours to enable the independent inspector so appointed to have full access to the facilities at the Loading Terminal necessary to perform his duties, or:
(ii) should the parties fail to agree upon an independent inspector, or should the Loading Terminal refuse access to any independent inspector appointed by the parties then by the Loading Terminal's own qualified inspector(s) in accordance with good standard practice at the Loading terminal at the time of shipment.
1.2 Certificates of Quantity and Quality
1.2.1 Provided always the certificates of quantity and quality ……. of the Product comprising the shipment are issued in accordance with sections 1.2. 2 or 1.2.3 below then they shall, except in cases of manifest error or fraud, be conclusive and binding on both parties for invoicing purposes and the Buyer shall be obliged to make payment in full in accordance with Section 30.1 but without prejudice to the rights of either party to make any claim pursuant to Section 26.
………….
1.2.3 Any certificate of quantity and quality issued by an independent inspector pursuant to Section ….1.1.2(i) shall record that the independent inspector did witness, or himself undertook, the taking of samples and that the independent inspector did witness, or himself undertook, the analysis of such samples………….
1.2.4 In the event that the independent inspector did not undertake or did not witness the taking of samples or the analysis of such samples then the certificate of quantity and quality issued or countersigned by him must expressly reflect this and it will not, in these circumstances, be a certificate of quantity and quality for the purposes of Section 1.2.1 but merely evidence of those matters undertaken or witnessed by the inspector.
1.3 Place of Certification
Should it not be customary practice at the Loading Terminal at the time of shipment for measurement and sampling pursuant to Section 1.1 to take place at the Vessel's manifold immediately prior to loading, or should the parties agree otherwise, then it is a condition of the Agreement that the Seller shall be obliged to provide the same quantity and quality of the Product at the Vessel's permanent hose connection as set out in the certificates of quantity and quality so issued.
HSFO (high sulphur fuel oil)
HSFO is a by-product of the process by which crude oil is refined to produce clean products such as gasoline, jet fuel and diesel. HSFO which has been derived from the primary atmospheric distillation of crude oil is generally of higher quality and is known as “straight run fuel oil”. HSFO which has been derived from the secondary process of cracking is known as “cracked fuel” oil and considered of lower quality.
The main markets for HSFO are power generation and as a low priced bunker fuel in ships.
TSP or Total Sediment Potential (referred to in ISO 8217 as “total sediment aged”) is a measure of how much sediment (asphaltenes) any given fuel oil will produce in long term storage. Thus TSP does not indicate the presence of contaminating materials but measures the fuel oil's tendency to precipitate sediment in, for example, the fuel filters of a marine engine.
The joint instructions to the independent surveyor
On 25 June 2018 the Seller nominated Ventspils as the loading port. On 26 June 2018 the Buyer provided SGS Latvija Limited (SGS) with instructions to perform quantity and quality determinations of the fuel oil to be shipped at Ventspils on board the vessel NOUNOU. There was no dispute that these instructions were approved by the Seller and so were joint instructions. They stated that:
“Quality to be ascertained or witnessed (as per standard practice at load port at time of loading), basis representative composite sample drawn from shore tank(s) before commencement of loading.”
Section C stated the matters to be included in the survey report. Paragraph 8 stated:
“Condition of pipeline before and after load (indicate the total capacity of the shore and ship's pipeline). Verification on pipeline contents to be made by inspector. Check all interconnecting valves to nominated loading system and seal shunt (sic).”
Section D set out the specification and in respect of TSP provided for a maximum of 0.1%.
The samples taken by SGS prior to loading and the certificate of quality
Samples were taken from a number of shore tanks on 20, 26 and 27 June 2018 and a composite sample prepared. It was analysed between 29 June and 2 July 2018. By a certificate dated 2 July 2018 the TSP was stated on behalf of SGS to be 0.04% and accordingly within the contractual specification.
The loading of the cargo
The cargo was loaded on board the vessel NOUNOU between 30 June and 2 July 2018. The quantity loaded was 41,335 mt.
Subsequent events
Between 2 July 2018 and 11 July 2018 the cargo was transported to Gibraltar where it was transferred to the M/V FIONIA SWAN and the M/V SKS TANARO pursuant to a contract of sale between Septo and Macoil International SA. On 17 July 2018, Saybolt España S.A.L. issued a certificate of analysis in respect of samples drawn from the M/V SKS TANARO on 12...
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