Trafigura PTE Ltd v Taci Oil International Trading and Supply Company SH.A

This is the trial of the Claimant's claim for the deferred balance of the purchase price payable for quantities of gasoil. The goods were supplied between 21 January 2013 and 25 February 2013 on the basis of a 50 per cent payment in advance and 50 per cent payment within 90 days thereafter. This claim is a discrete part of the claims in the action. The balance of the claims and the issues arising in relation to them have been stayed at the Claimant's request.

The Claimant is an international commodities trading business. The Defendant is a limited liability company registered in Albania which is in the business of the wholesale and retail distribution of oil products.

The Defendant was initially represented in these proceedings by Brown Rudnick LLP and filed a Defence. After procuring an adjournment of the Case Management Conference by failing to participate in case management, the Defendant ceased to be represented shortly before the relisted Case Management Conference took place. The Defendant has played no part in proceedings since. At that Case Management Conference on 24 July 2015, at the Claimant's request the Court stayed the Claimant's claims pending determination of related LCIA arbitrations, save for this claim for the deferred price of goods which has proceeded to this trial. The Defendant has not complied with any of the Court's directions made at that Case Management Conference and has not responded to any correspondence since. The Defendant has also failed to respond to a Request for Further Information as to its defence. It did not appear at the trial before me. I am satisfied that all proper steps have been taken to bring to the Defendant's notice the hearing of this trial; and that the Defendant, with full knowledge that it is taking place, has simply chosen not to take part.

I have heard the evidence of Mr Djelalian, who is the Claimant's structured finance manager, and was well placed to assist the court, having negotiated and agreed the deferred payment regime with the Defendant, supervised its operation, and been involved throughout the difficulties which followed as a result of the Defendant's failure to make the required payments.

By an agreement dated 24 April 2012 (“the Sale Contract”), Trafigura Beheer BV, the Claimant's predecessor, and the Defendant agreed that the Defendant would purchase approximately 120,000 metric tons of gas oil and approximately 33,000 metric tons of gasoline per year, in lots of approximately 20,000 metric tons and 3,000 metric tons respectively, subject to seller's availability. Delivery was to be on ex-works terms into the Defendant's nominated trucks at Porto Romano in Albania. There was an option to take product on CFR terms which was not exercised. Payment was to be made in full in advance of delivery.

Following an internal re-organisation in October 2012, the Claimant took the place of Trafigura Beheer BV, and the necessary novations of the Sale Agreement and other agreements took place.

In due course, the Defendant became interested in acquiring an asset of Albpetrol, the Albanian state petroleum entity, which was designed to improve its strategic position in Albania. The Defendant enquired of the Claimant whether the Claimant would be prepared to consider a form of financing arrangement to assist the Defendant with its expansion plans. Mr Djelalian travelled to Albania to meet Mr Taci, the CEO and founder of the Defendant, and his colleague Ms Dervishi, the Defendant's Head of Finance.

The outcome of those discussions and subsequent negotiations was an agreement recorded in writing, to a deferred payment regime which allowed the Defendant the option to pay for cargo delivered by way of 50 per cent of the value of the cargo in advance with the balance being payable within 90 days thereafter. The maximum facility under those arrangements was US $5 million. I shall refer to that as the “deferred payment regime”. As security for that credit line, the Defendant granted to the Claimant a second ranking mortgage over certain property. The amendments which comprised the deferred payment regime included specific provision for interest which was to be payable. It was to be payable at LIBOR plus 5 per cent within the initial 90 day period, and at LIBOR plus 8 per cent thereafter. The LIBOR rate referred to was the US dollar three month LIBOR rate as quoted by the BBA at or around 1100 hours each day on which interest fell due.

It is common ground that the Defendant gave notice that it wished to exercise its option to use the deferred payment regime. Mr Djelalian gave evidence as to how the deferred payment regime operated. In short, the Defendant on each occasion notified the Claimant that it was making a payment for goods and notified the Claimant that it wished to use the deferred payment regime to, as the Defendant put it, double the value of the release. As a result, on each occasion, and in accordance with the deferred payment regime, the Claimant released to the Defendant goods which equated to twice the value of the payment received.

The Defendant requested releases under the deferred payment regime on 11 occasions between 21 January 2013 and 25 February 2013 when the limit of US $5 million was reached. The evidence of Mr Djelalian, supported by the documentation which is in the court bundles, verifies all those releases.

Therefore, pursuant to the deferred payment regime, the balance of the purchase price, that is to say the remaining 50 per cent, was due within 90 days after the initial payment. Repayments fell between 22 April 2013 and 29 May 2013.

In advance of the first repayment falling due on 22 April 2013, on 20 April 2013 Mr Djelalian personally followed up on a summary of the repayments falling due, which had previously been sent by his colleague, in order to confirm that the Defendant had everything in place to make the repayments. The Defendant confirmed that the repayments would start. There then followed repeated exchanges during which the Defendant regularly agreed that sums were owed, apologised for the default in making payment and promised payment in short order. At no point during that correspondence did the Defendant dispute the amounts which it was obliged to pay, or the dates on which the repayments fell due.

However, despite the Defendant's many assurances, only a small sum was paid, which was sufficient to discharge the first instalment due and part of the second instalment. Those payments were made between 17 and 30 May 2013.

On 24 July 2013, the Claimant's solicitors, Ince & Co LLP, sent a formal Letter Before Action to the Defendant demanding payment of the sums due under the deferred payment regime and providing detailed calculations showing the total of US $4,430,013, inclusive of interest.

Mr Taci responded with a letter on behalf of the Defendant on 25 July 2013, admitting liability to the Claimant for the first US $3,553,831.38 of the sums due, but querying the balance. He yet again promised payment to the Claimant.

In response to the query over the remaining approximately $800,000 of the debt owing, the Claimant provided a detailed explanation of the total, in response to which the Defendant, by way of an email of 31 July 2013from its Head of Finance, Ms Dervishi, confirmed that the Claimant's figures and calculations were accurate.

However, no payment was made by 8 August 2013, as had been promised by Mr Taci, or at any time thereafter.

The Defence which was served on behalf of the Defendant raised four issues. First, it was said that in respect of repayments: "The amounts and the date due remain subject to discussion between the parties", and that there was a "degree of flexibility" agreed as to the due dates.

Secondly, it was pleaded that in that connection: "The Claimant has, contrary to the principle of cooperation and flexibility agreed between the parties, refused to engage in such good faith discussions."

Thirdly, the Defence disputed the significance of the admission by Ms Dervishi in her email of 31 July 2013 of the amounts outstanding on various grounds, including asserting that she lacked authority.

Fourthly, the Defendant put the Claimant to proof of its calculations of the sums due.

I shall address each of those four defences in turn.

Subject to discussion and flexibility.

The Defendant's case on the alleged flexibility is vague and un-particularised. The Claimant served a Request for Further Information but was not given a response. Nevertheless, it is clear from the evidence that there was no such alleged flexibility. The written terms of the Sale Contract and the deferred payment regime are clear and precise. The latter expressly provides that the balance falls due on each occasion after 90 days. Mr Djelalian's evidence, which described the negotiation of the agreement and the agreement itself, amply demonstrates that there was no such flexibility as has been alleged. The Defendant has not adduced any evidence to support the plea on this aspect of its defence. It can therefore safely be rejected

The Defendant criticises the Claimant for failing to engage in good faith discussions "contrary to the principle of cooperation and flexibility agreed between the parties." However, there was no such principle of cooperation and flexibility agreed. As I have already said, the evidence is clear that the repayment terms were explicitly agreed in writing and the parties' contemporaneous understanding is clear from the documents and from Mr Djelalian's evidence. There is no evidence adduced by the Defendant to the contrary. There is, therefore, no good reason to imply any such principle into the agreement.

Moreover, even if the repayments had been subject to such a principle, which they were not, the Claimant would not have been in breach of it. The Claimant engaged in lengthy correspondence with the Defendant to explore the position and to agree further dates for repayment. That is clear from the correspondence and from the witness evidence of Mr Djelalian. Accordingly, there was in any event no failure to enter into good faith discussions about the debt.

The matters that are pleaded in the defence in this respect are of limited relevance. This is only one of numerous admissions, all of which serve an evidentiary purpose, and which include admissions by Mr Taci personally, who undoubtedly had authority to make those admissions.

Nevertheless, as to Ms Dervishi's authority, there is no evidence presented by the Defendant of any lack of authority. She was presented as the Defendant's Head of Finance, who, together with Mr Taci, met Mr Djelalian to discuss the possibility of a financing option and who, as Mr Djelalian's evidence has described, took a full part in the discussions. She was subsequently involved throughout the difficulties which followed the failure to repay sums due under the deferred payment regime as the primary point of contact at the Defendant.

In those circumstances, it is to be inferred that Ms Dervishi had actual authority to act for the Defendant when she sent the email of 31 July. Further or alternatively, she clearly had apparent authority, on the basis that the Defendant, in particular through Mr Taci, represented, or permitted it to be represented to the Claimant, that she had authority to act on its behalf in relation to the negotiation and operation of the deferred price regime.

In response to other points raised by the Defendant in the pleading concerning the email of 31 July 2013, there is no evidence to support the allegation that the Defendant had not received legal advice prior to the email being sent, there is no evidence that Ms Dervishi's grasp of English was inadequate and indeed Mr Djelalian's evidence, together with the fluency of Ms Dervishi's correspondence, establishes otherwise. The allegation that Ms Dervishi has no knowledge of English law or English legal procedures is unsupported by evidence and so too is the allegation that the Defendant did not have full and proper knowledge of all the facts relevant to the email at the time it was sent out. In any event, there is nothing in these allegations to undermine the evidential value of the full admission made by Ms Dervishi in that email.

The Defendant did not plead a positive case on the sums outstanding but rather put the Claimant to proof of the amounts due. The evidence of Mr Djelalian and the corresponding supporting documentation has proved that the amount outstanding at yesterday's date, by way of principal and interest, calculated in accordance with the deferred payment regime, is US $5,296,232.

Accordingly I will give judgment in favour of the Claimant in that sum.