QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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Glencore Energy UK Ltd |
Claimant |
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- and - |
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Cirrus Oil Services Ltd |
Defendant |
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Stephen Kenny QC (instructed by Osborne Clarke) for the defendant
Hearing dates: 14th, 15th, 16th, 17th, 20th and 24th January 2014
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Crown Copyright ©
Mr Justice Cooke:
Introduction
i) Was there a concluded contract between Glencore and Cirrus Oil on 3rd/4th April 2012 or were the arrangements then made "subject to contract" or to finalisation of further terms?ii) What was the identity of the buyer? If no buyer was identified then Cirrus Oil say there was no contract. If a buyer was identified, was it Cirrus Oil or its parent company Woodfields Energy Resources Ltd ("Woodfields"), it being said by Cirrus Oil that Woodfields was the appropriate company for crude oil purchases, as opposed to purchases of refined products.
iii) If there was a binding agreement between Glencore and Cirrus Oil, was it induced by misrepresentation on the part of Glencore that Glencore was able to and intended to provide oil from well 16 to fulfil the contract?
iv) If there was a binding agreement not induced by misrepresentation, as it is common ground that Cirrus Oil refused to proceed with the contract, what damages are recoverable by Glencore? The issue between the parties here, on the basis that the loss falls to be assessed as the difference between the contract and market value of the oil, is the true open market value at the time it would have been delivered at the end of May 2012.
v) Does section 32.1 of the BP General Terms and Conditions for Sales and Purchases of Crude Oil (incorporated by reference in the "firm offer" email of 3rd April) operate to prevent recovery by Glencore of this measure of damages.
The evidence
The Background
i) Mrs Owusu could not have told Mr Obiri that all crude oil deals for which she made enquiries or which she negotiated were to be with Woodfields as buyer. If she had, he would have recalled this as an important distinction and passed it on to Glencore. Moreover, if she had ever told him this, it would have appeared in her witness statement as a matter of considerable importance. She was unable to identify the occasions on which such conversations occurred and I conclude that this evidence was fabricated to support Cirrus Oil's case.ii) Neither Mr Obiri nor Mr Prempeh had any idea that there was any rigid separation of the types of business done by Woodfields and Cirrus Oil or that there was any restriction on Cirrus Oil trading in crude oil, nor on Cirrus Energy Services Ltd/Woodfields trading in refined products. When dealing with Mrs Owusu or Ms Addae, both looked to them to identify the purchaser if it was different from the name that was put forward or the name that had been used previously.
iii) At the time when enquires were made for crude oil in February 2012, as a result of the four previous successful deals with Cirrus Oil, Mr Obiri saw it as his only "client". In the absence of any information to the contrary, it was natural for him to assume, and he did assume, that, as Cirrus Oil was the only contracting company in deals in which Mrs Owusu had been involved with him, this company would be the buyer. When Mrs Owusu contacted him, he thought of her as representing Cirrus Oil.
iv) If Mrs Owusu had ever identified the company for whom she was acting as Woodfields in relation to crude oil deals generally or when approaching Mr Obiri in relation to such deals with Glencore, he would have recalled that and would not have made the assumption that he did. He would also have passed that on to Glencore.
v) The natural and obvious meaning for the use of the word "Cirrus" after January 2011 was as an abbreviation for "Cirrus Oil", not as a reference to Woodfields or to a "group" consisting of the two companies.
The Negotiations from February 2012 onwards
"Following up on our discussions with TOR, we would want both an FOB quote and CFR quote for the term deal that we have with them.
Let's quote on either blends or medium crudes. At least four crudes would be good with the size of 600k bbls. They have expressed interest in Coco as well as Oluwi (Gabon right?), Okwuibome, Agbami, Ukpokiti, Akpo.
Ninety day LC from BL if loading is in Nigeria or somewhere close since a longer journey will eat into the credit days.
Please give me some very sharp prices so we don't drag this out with a long negotiation in order not to lose steam."
"The expected composition of the blend is as below (with relevant assays attached) although we would be offering cargo specs as "normal export quality"."
He then set out the proportions of the three constituent parts and continued:
"As far as a CFR indication (not firm yet) is concerned, we could offer to Cirrus as follows:
"Volume: 600-650mbs+5% Sellers option
Grade: Ebok of normal export quality, Nigeria.
Price: Dtd + $0.55/bbl (plus fifty five cents per bbl) CFR Tema
Loading 1-10/6 with arrival in Tema consistent to loading
Laytime: 36+6 Shinc
Pricing: 5 quotes after B/L
Payment: 90 days after B/L with full L/C opened no later than 12 days prior to loading
GTC's: BP CFR 2007
Inspection: 50/50
Law: English, High Court
"
"This should read offer to TOR not Cirrus."
The words "offer to TOR not Cirrus" were underlined, in italics and in bold type. There cannot therefore be the slightest doubt that Mrs Owusu's attention was clearly drawn to the word "Cirrus" in the Glencore indication, because of her failure to alter it in the first place and the need to correct it in her indication to TOR. If she had considered that any crude oil contract with Glencore should be with Woodfields, not with Cirrus Oil, this would have been the obvious moment to point this out to Mr Obiri and Mr Stimler, but she did not. On her evidence any contract with TOR would be made by Woodfields and any purchase from Glencore would be made by the same company. It is inherently improbable that, having made the correction that she did in the indication given to TOR, she would not then have corrected Glencore's reference to "Cirrus" if she thought it should have referred to Woodfields.
"TOR is interested, went back to Accra but heading back there now. Want to lock in."
Contrary to Mrs Owusu's evidence, she was telling Mr Obiri that she was keen to conclude the transaction. His response to her, which he also pasted in to his text to Mr Stimler, had been:
"Cool. Anthony [Mr Stimler] on standby. Fingers crossed."
Mr Obiri concluded the message to Mr Stimler by saying he would let him know as soon as Mrs Owusu had returned to Accra. There were no email exchanges on 2nd April and as Cirrus Oil has abandoned its case on misrepresentation, the only relevance of any telephone or text exchanges between Mr Obiri and Mrs Owusu would relate to the identity of the buyer.
"As discussed in an effort to get this wrapped up today as our first crude oil deal with Cirrus, we are willing to offer the following firm (until 6pm this evening) which should now be doable with TOR.
Please revert soonest.
Kind regards,
Anthony
TERMS
Seller: Glencore Energy UK Ltd.
Buyer: Cirrus (Full trading name)
Grade: Ebok crude oil of normal export quality, Nigeria
Price: Dtd + $0.15/bbl (plus fifteen cents per bbl) CFR Tema
Vessel: To be acceptable to Tema (not to be unreasonably withheld)
Loading: 29-31/5 with arrival in Tema consistent to loading
Laytime: 36+6 Shinc
Pricing: 5 quotes after B/L
Payment: 90 days after B/L with full L/C opened by Cirrus no later than 12 days prior to loading
GTC's: BP CFR 2007.
Inspection: 50/50 at load.
Law: English, High Court."
"Anthony and Edwin. Good news! TOR has agreed to the June cargo. Will revert on the fine tuning of the contract terms so that it's back to back with ours which will be with TOR."
"That is indeed very good news. I will revert with operational contacts shortly so that we can get everything in place. Many thanks for this business transacted and look forward to a lot more in the future between our two companies."
"Absolutely. TOR also wants me to bring them a term proposal on Ebok or other similar crude "
Mr Stimler's response was then to ask for the "full trading name of your company so we can start the process rolling".
The Alleged Contract
"45. The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement."
"(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole ... (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed ... (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled ... (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so called 'heads of agreement'."
i) The fact that Woodfields had been publicly reported as having an involvement in crude oil trading in relation to the lifting of the Jubilee field cargo is of no assistance. Mrs Owusu did not even know whether Woodfields had acted as a principal in this transaction although Mr Obiri knew that Woodfields had been involved in the winning bid with Vitol.ii) There was no knowledge of anyone at Glencore of the identity of the company which had supplied crude oil to TOR and an internal arrangement between Cirrus Oil and Woodfields would not in any event have been out of the question.
iii) Although, in the only prior negotiation before Glencore and Mrs Owusu relating to a crude oil transaction, Glencore had been informed that the buyer was to be Woodfields not Cirrus Oil, that was not something which occurred in the present case, as would be expected if it was not a company with the name "Cirrus" that was to be the buyer.
iv) Whilst Mr Stimler would have had no objection to Woodfields as a buyer and might well have agreed to the substitution of Woodfields, had that ever been requested, the email acceptance made no suggestion of any change to the identity of the buyer as put forward in the firm offer email of "Cirrus (Full trading name)". Where objection had been raised to the name of the buyer put forward by Glencore in any prior transaction, a change had been effected, but nothing of the kind occurred here.
v) The licensing position takes the matter no further at all because of Mr Obiri's evidence on the subject to which I have referred earlier in this judgment. There was no known restriction on Cirrus Oil's ability to trade in crude oil.
vi) Mr Obiri's awareness that there were more than one company in what could loosely be referred to as "the Cirrus group", that Cirrus Oil and Woodfields were affiliated entities and that different companies were used for different purposes cannot impact upon the use of the terms in the emails constituting the offer and acceptance.
vii) The cross-examination of Mr Stimler about whether his firm offer was made to a company to be nominated does not advance matters either. Mrs Owusu was being asked to identify the full trading name of the Cirrus company in question but Mr Stimler was expecting the full name to begin with the word "Cirrus" as is plain from the email. The email identified a company beginning with that name, not Woodfields, which was the only other possibility.
Market Value
i) March 2012 500,000 bbls sold to Unipec at DTD - $4.70.ii) April 2012 950,000 bbls sold to Iplom on a frame term contract for which no price was available.
iii) May 2012 650,000-1 million bbls sold to Exxon at DTD -$5.25.
iv) July 2012 950,000 bbls sold to Exxon at DTD -$5.
i) 22nd-30th December 2011: 700,000 bbls at DTD -$1.50 ex ship Rotterdam, equivalent to about DTD -$4.50 FOB Nigeria.ii) 28th-30th January 2012: 1 million bbls at DTD -$2.20 CFR Rotterdam, equivalent to about DTD -$4.40 FOB Nigeria, or slightly less.
iii) 19th-21st March 2012: 1 million bbls at DTD -$2.50 CFR Rotterdam equivalent to about DTD -$4.70-$5.000 FOB Nigeria.
iv) 25th-30th May 2012: 650,000-1 million bbls at DTD -$3.00 CFR Rotterdam equivalent to about DTD -$4.807-$5.50, depending on the final shipping quantity and vessel used.
i) The price was DTD -$3.00 CFR Rotterdam.ii) I accept the freight calculations made by Dr Holdaway, because they are tailored to the actual route and actual size of the cargo. The figure is $2.13 per barrel for freight to Rotterdam.
iii) The port charges are those applicable to a Suez max vessel, namely $0.16 per barrel.
iv) The Nigerian Maritime Authority dues amount to $0.15 per barrel.
v) The FOB Nigeria price thus becomes DTD -$5.44 per barrel.
i) The effect of any knowledge of the DTD -$5.50 FOB Nigeria price payable by Glencore to Socar (itself a low price by reason of the link to the Akpo deal) in setting a benchmark.ii) Its effect on diminishing the price paid by Exxon.
iii) The fact that this cargo was being offered 2-4 weeks later than usual by Socar, with therefore an element of pressure involved.
iv) The possibility of unreported sales by majors or refineries.
v) The Nigeria OSP which is conventionally regarded as being on the low side.
vi) The much higher price that TOR was willing to pay for the Well 16 cargo.
Clause 32.1
"32.1. Except as specifically provided in the Special Provisions or in Section 12.4, in no event, including the negligent act or omission on its part, shall either party be liable to the other, whether under the Agreement or otherwise in connection with it, in contract, tort, breach of statutory duty or otherwise, in respect of any indirect or consequential losses or expenses including (without limitation) if and to the extent that they might otherwise not constitute indirect or consequential losses or expenses, loss of anticipated profits, plant shut-down or reduced production, loss of power generation, blackouts, or electrical shutdown or reduction, hedging or other derivative losses, goodwill, use, market reputation, business receipts or contracts or commercial opportunities, whether or not foreseeable."
Conclusion