Vitol S.A. v JE Energy Ltd
| Jurisdiction | England & Wales |
| Judge | Lionel Persey |
| Judgment Date | 07 October 2022 |
| Neutral Citation | [2022] EWHC 2494 (Comm) |
| Docket Number | Case No: CL-2020-000316 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 2494 (Comm)
Lionel Persey KC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2020-000316
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul Henton (instructed by Reed Smith LLP) for the Claimant
Oliver Caplin (instructed by by Watson Farley & Williams LLP) for the Defendant
Hearing dates: 28 February 2022 and 1–3 March 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Lionel Persey KC SITTING AS A JUDGE OF THE HIGH COURT
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 07 th October 2022 at 10:30am.
Lionel Persey KC (sitting as a Judge of the High Court):
Introduction
In this matter the Claimant, Vitol S.A. (“ Vitol”) claims damages from the Defendant, JE Energy Ltd. (“ Jeda”) arising from the repudiation of a contract for the sale of 30,000MT (-/+ 10%) of Fuel Oil to be delivered FOB Tema in Ghana. Jeda denies liability and contends that Vitol was itself in repudiatory breach of contract. It has a counterclaim.
The parties and the factual witnesses
Vitol is one of the world's largest energy and commodities trading companies. Jeda is a Ghanaian crude oil and petroleum products trading company.
Three factual witnesses were called to give evidence on behalf of Vitol. They were:-
(1) Mr Joshua Tobechukwu Okpalanne, Vitol's Business Development & Commercial Manager, Ghana. He was Vitol's man on the ground in Ghana and his role was to present potential opportunities for the sale of oil products for the approval of Vitol's West Africa Crude Oil desk in London. I found him to be an excellent witness.
(2) Ms Filipa Osorio de Barros Mateus Martinho, who is employed by Vitol's Rotterdam branch as a financial operator. Her role was to deal with all of the financial aspects of Vitol's operations, including the issuance of contracts and taking care of matters such as letters of credit (“ LCs”) and guarantees. She too was an excellent witness.
(3) Mr Frederick Nicholas Barrow, a crude oil broker employed by Vitol Broking Limited. Mr Barrow and his team were responsible for crude oil coming out of West Africa and his role included the recommending to Vitol of particular contracts for the sale and purchase of crude oils. I found his evidence in relation to issues of liability to be reliable and supported by the contemporaneous exchanges. As I discuss below, however, I was not convinced by some of his evidence that is relevant to the quantum of Vitol's claim.
Two witnesses gave evidence for Jeda:-
(1) Mr Joseph Ilebode, Jeda's managing, and sole, director. I did not find him to be a satisfactory witness. His evidence did not accord with the contemporaneous exchanges and often seemed to me to be more concerned with presenting a case on behalf of Jeda than with giving an accurate account of events. This was also the case with some of the contemporaneous email and WhatsApp messages sent on behalf of Jeda. I am only prepared to accept Mr Ilebode's evidence where it is consistent with the reliable contemporaneous evidence.
(2) Mr Obed Assensoh, the commercial director of Jeda. He is responsible for managing all operational, financial and commercial matters concerning Jeda's Ghanaian business. Prior to joining Jeda he had about 10 years' experience in the banking sector in Ghana. His evidence was confined to fairly narrow parts of the case and was argumentative in parts. I am again only prepared to accept his evidence when it is consistent with the reliable contemporaneous documentation.
The set-up in Ghana
The Tema Oil Refinery
Vitol's business activities concerning Ghana include the supply of crude oil for processing into refined products at the Tema Oil Refinery (“ TOR”), and the sale of oil products produced at the TOR.
The TOR is Ghana's only oil refinery. It was built more than fifty years ago, at a time when there was a lower demand for oil products and energy in Ghana than today. It cannot meet all of Ghana's domestic needs. The country also relies on imports, and in times of shortage (“brownouts”) berthing priority at the port will be given to imports ahead of export cargoes of oil products produced at the TOR.
Woodfields
Only local Ghanaian companies can secure processing agreements with the TOR. They are known as bulk distribution companies (“ BDC”).
Vitol has an arrangement with Woodfields Energy Resources Ltd (“ Woodfields”) that uses Woodfields' status as a BDC. The arrangement in outline is that Vitol sells crude oil to Woodfields for processing at the TOR into products such as fuel oil. Vitol then either buys back the refined products which it then sells locally or internationally, or else directs that they be sold directly by Woodfields to Vitol's intended buyer, with Woodfields earning a processing fee (essentially a commission) per barrel processed. Vitol remains in control of, and on risk in relation to, the crude oil and its products at all times.
The NPA / GPHA
The Ghanaian downstream oil products market is regulated by the National Petroleum Authority (“ NPA”). The NPA grants licences to the BDCs. It also controls the scheduling of vessels at the Port of Tema. The Port of Tema itself is maintained by the Ghana Port and Harbour Authority (“ GPHA” or “ Port Control”). The port operates two berthing facilities: a conventional buoy mooring system (CBM) for larger vessels, and an oil jetty for smaller vessels. The vessels in the present case berthed at the jetty. The jetty is used for both loading and discharging operations.
The NPA has control over berth allocation. It publishes a quarterly schedule of berth allocations/slots, colloquially referred to as its “Laycan Allocation Programme”. Berthing is, however, at the NPA's discretion and it may not follow the slot allocation. For example, discharging vessels may be given priority, especially cargoes intended for the AKSA power plant to prevent brownouts, and/or cargoes prioritised on orders from the Ministry of Energy. Vessels may also be ordered to leave the berth due to inactivity.
Both parties had some contacts at the NPA: Vitol through Mr Okpalanne and his team on the ground in Ghana, and Jeda through Mr Ilebode's contacts and also through the port agents appointed by their sub-buyers Afco in due course. There was, however, competition for berthing allocations from a range of sources and, as the facts of this case show, neither party was able to wield significant influence over the NPA.
The Contract
The Contract was concluded following discussions between Mr Okpalanne and Mr Ilebode between 9 and 10 December 2019. It was the second (and last) contract concluded between the parties.
The deal was recapped on 10 December 2019 (“the Deal Recap”) as follows:-
“… Buyer: JE Energy Ltd.
Quantity: 30,000mt (-/+ 10% in Buyer's option)
Quality: as per TOR typicals
Delivery: FOB Tema in one lot
Laycan: 23 – 24 December 2019
Price: Platts CIF NWE Fuel Oil 1.0% (Cargoes) + 100 $/mt (plus one hundred USD dollars per metric tonne)
Pricing Period: Fixed date range 20–30 Dec (both dates included)
Payment terms: BL +30 calendar days
Payment Security: Documentary LC
Port & Calling costs: For Buyer's account
Laytime: 48 hrs total NOR SHINC
Demurrage: As per CP terms
Inspection: 50/50 between Buyer and Seller
Q&Q determination: As per load port inspection
Licenses & Clearance: Export and associated clearances are Seller's responsibility
Law: English …”
The parties agree that the terms of the Deal Recap formed at least a part of their contract. Vitol says that their long-form contract terms were also agreed. Jeda, however, contends that the parties' negotiations did not lead to an agreement and that only the Deal Recap terms apply. This stance is in fact contrary to that taken by Jeda's solicitors in pre-action correspondence.
It is well established in the cases that where, as here, a recap has been agreed that sets out the essential terms then this may readily be supplemented by a subsequent long-form contract and that it is not necessarily appropriate for the strict requirements of a positive offer and a positive acceptance to be satisfied. In Pagnan v Feed Products [1987] 2 Lloyd's Rep 601 at 614, Bingham J (as he then was) said this:-
“…if (as I think) the parties were not negotiating terms, agreement of which was to be a pre-condition of contract, but sorting out details against the background of a concluded contract, these exchanges take on a very different colour. In its true context the buyers noting of the sellers' compromise proposal for pricing the quantity tolerance and their lack of any objection to it is in my view to be regarded as acceptance of it.”
His decision was upheld by the Court of Appeal. Bingham J's reasoning was followed by Aikens J (as he then was) in Statoil ASA v Louis Dreyfus Energy Services LP: The Harriette N [2008] 2 Lloyd's Rep 685, at [70]:-
“ … If the principal terms have been agreed and the parties are, to use Bingham J's phrase in the Pagnan case, “sorting out details against the background of a concluded contract”, then the strict requirements of positive offer and positive acceptance are not necessarily appropriate. If one party makes a proposal for terms and the other does not object to it when asked if it has objections that can, in appropriate circumstances, be taken as acceptance of that term: Pagnan at page 614 per Bingham J …”
Jeda did not refer to either of these cases in argument. They instead relied upon cases that involved different...
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FOB Buyers Beware: Sale Contract Letter Of Credit And Laycan Provisions Vitol SA v JE Energy Ltd
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