BP OIL INTERNATIONAL LIMITED v GLENCORE ENERGY UK LIMITED

This is a contractual claim for damages brought by BP Oil International Limited (“BPOI”) in relation to a cargo of crude oil which BPOI purchased from the defendant (“Glencore”) and which BPOI alleges was contaminated with organic chlorides.

BPOI is an oil trading company incorporated in England and carrying on business in the sale and purchase of crude oil and petroleum products. Glencore is a commodity trading company incorporated in England engaged in the sale and purchase of commodities including crude oil.

By a contract of sale formed in April 2019, the terms of which are disputed, Glencore sold 100,000 MT +/- 10% of Russian Export Blend Crude Oil (“REBCO”) to BPOI, to be loaded between 13 and 18 April 2019, delivered CIF Rotterdam, and at a price of “Dated Brent + 0.53 USD” per barrel.

The contract of sale incorporated by reference BPOI’s General Terms & Conditions for Sales and Purchases of Crude Oil and Petroleum Products 2015 Edition (the “GT&Cs”).

By a contract dated 5 April 2019 BPOI re-sold the cargo of REBCO to an affiliated company, BP Europa SE (“BPESE”) for delivery CIF Wilhelmshaven (the “Sub-Sale”). BPESE intended to process the cargo at its Gelsenkirchen refinery.

The Sub-Sale was agreed on materially back-to-back terms to those in the contract of sale, save that the purchase price was “Dated Brent plus a premium of 0.43 US dollars per US barrel”. However, as discussed below, the contract for the Sub-Sale made no reference to the purchase from Glencore and merely provided for a quantity of 100,000 MT of REBCO (plus/-10%) loaded at Ust-Luga between 13 – 18 April 2019.

On or around 10 April 2019, the parties appointed Cargo Inspections Group (“CIG”) as independent load port inspectors.

On 16 April 2019, a cargo of REBCO (the “Cargo”) was loaded on board the M.T. “ALEXIA” at Ust-Luga, Russia. The Cargo was covered by two bills of lading dated 16 April 2019. A commercial invoice and letter of indemnity were issued dated 16 April 2019. On about 17 April 2019, CIG provided BPOI with certain shipping documents for the Cargo.

On about 22 April 2019 the Cargo arrived and was discharged at Wilhelmshaven.

Two certificates of quality numbered “92a” (“CoQ 92a”) and “92b” (“CoQ 92b”) in respect of the Cargo were delivered to BPOI on about 17 April 2019.

Neither of these documents made any reference to organic chlorides.

Certificate of quality 92 (“CoQ 92”) was sent by CIG to Glencore on 25 April 2019 following an enquiry by Ms Pelyak of Glencore by email as to whether CIG had tested the Cargo for organic chlorides and whether the terminal had organic chloride results for the Cargo. CoQ 92 was first sent to BPOI on 8 May 2019.

By a contract dated 20 June 2019, as amended, the Cargo was re-sold by BPESE to BPOI for a purchase price of Dated Brent minus US$8 per barrel, with delivery ex ship Castellon.

By a further contract dated 20 June 2019, as amended, the Cargo was then re-sold by BPOI to BP Oil Espana SA (“BPOESA”) for Dated Brent minus US$8 per barrel, with delivery ex ship Castellon. The intention was for the contaminated oil to be diluted, blended and processed by BPOESA at its Castellon refinery. The oil was discharged in three tranches and then processed at that refinery.

It is alleged for BPOI that upon sampling tests being carried out, it was discovered that the Cargo was contaminated by organic chlorides at a concentration of around 11.9 to 15.7 parts per million (“ppm”) (Amended Particulars of Claim).

The court had witness statements from the following for BPOI:

Ms Tara Behtash;

Mr Robert Earl;

Mr Matthew Hague;

Mr Duncan Haines;

Mr Ronald Sieder; and

Ms Yael Spier.

Mr Earl, Mr Hague and Mr Haines were called and were cross examined.

Before 1 January 2021, Mr Earl was the ESA Crude and Feedstocks Bookleader. ESA stands for Europe and South Africa. That role involved liaison between the BPOI crude oil trading business on the one hand and BP's refineries on the other hand, to procure from the market the crude oil and feedstocks that the refineries need.

Mr Earl was not directly involved in the conclusion of the deal with Glencore. He was involved in the sub sale to BPESE briefly because he was covering Mr Haines during the week of 1 April 2019, but according to his evidence, Mr Haines would have done all of the groundwork and liaising with BPESE in respect of their requirements before then. (Witness Statement of Robert Earl)

In my view Mr Earl sought to answer the questions posed in cross examination despite at times robust questioning from counsel. On the calculation of losses attributable to hedging I accept that Mr Earl was doing his best to provide a calculation which he felt reflected the actual losses attributable to hedging.

Mr Haines worked at BPOI where his role was to procure crude oil and feedstock for BP's refineries, including BP Gelsenkirchen. No criticism was made by Glencore of this witness.

Mr Hague is an oil trader for BPOI.

It was submitted for Glencore that:

I found Mr Hague to be straightforward in his evidence particularly in the face of a line of questioning that he (and BPOI) had sought to concoct a paper trail to support the value at which the Cargo was sold and that in effect BPOI had no real intention of selling to MOH, and despite the point being put repeatedly by counsel for Glencore. I note his evidence in cross examination as follows:

in the context of being asked about an internal discussion seeking an indication from PBF, another refinery:

in relation to the MOH chat on 14 May where MOH stated that “refinery would need to see $5-6 to consider it. So I think maybe we’re not the best outlet for that” Mr Hague was asked:

In relation to the MOH chat on 16 May where MOH made no reference to the Urals oil:

In the context of the chat on 23 May when MOH offered Dated Brent minus 8 for part of the Cargo and Mr Hague thanked MOH for its "feedback”:

Mr Hague was doing his best in my view to give reasoned answers in response to this line of questioning. There is no evidence which would suggest that Mr Hague in giving evidence had any motive other than to assist the Court.

I therefore find that Mr Hague was a credible witness and give weight to his evidence accordingly.

The Defendant elected not to cross-examine Yael Spier, Ronald Sieder or Tara Behtash. Ms Spier was at the relevant time legal counsel for BPOI and Mr Sieder was managing counsel at BPESE. Ms Behtash is a crude oil trader for BPOI. To the extent necessary their evidence is considered below.

The following witnesses gave witness statements:

Mr Michal Wawrzyniuk; and

Ms Galyna Pelyak.

Ms Pelyak describes herself as a member of the Operations team in the Crude Oil division of Glencore. She gave oral evidence and was cross examined. To the extent necessary her evidence is considered below.

Mr Wawrzyniuk is also a trader for Glencore. He was not cross examined and his witness statement was admitted on the basis that Glencore is not relying on the telephone call referred to at paragraph 14 of his statement.

BPOI’s chemistry expert is Mr David Jones, who describes himself as a chartered chemist and an experienced cargo surveyor. His two reports were before the court.

Glencore’s chemistry expert is Mr Richard Minton, who is a consultant chemist. His two reports were also before the court together with a joint memorandum.

No criticism is made of these witnesses by either party.

BPOI’s oil trading expert is Dr Adi Imsirovic, a senior research fellow at the Oxford Institute of Energy Studies and a former senior oil trader. He produced three reports.

The experts also produced a joint memorandum.

It was submitted for Glencore that the Court should exercise caution before placing weight on his evidence. Glencore criticised in particular his third report produced during the trial and dated 21 January 2022.

The court accepts that there were shortcomings in the third report produced in some haste. However, as with any witness, where the evidence is deemed relevant, the court weighs his evidence in a particular context against all the relevant evidence in order to reach a conclusion and in the event of a conflict between the experts which is necessary to resolve, this is dealt with below.

Glencore’s trading expert is Ms Elizabeth Bossley.

In the annex to her first report her expertise is encapsulated as follows:

Ms Bossley produced two reports.

It was submitted for Glencore that Ms Bossley:

Ms Bossley was on the whole a forthright witness who expressed her answers clearly. I accept that she had relevant expertise. However as discussed below, despite the fact that she was called as an expert witness to assist the Court (amongst other things) on the issue of value of the Cargo, she seemed reluctant to be drawn on actual value. It is unclear to the Court why she adopted this approach but as a result her evidence was of limited value on the key issue of the price at which the Cargo was sold by BPOI to BPOESA.

During the course of the trial the parties produced an Agreed List of Issues for Closing and these are referred to accordingly in this judgment. Whilst in broad terms such a list is helpful, what was less helpful was the failure to narrow the issues. As a result, each party submitted written opening and closing submissions amounting to some 50 pages, and in the case of Glencore a further annex to its closing submissions of some 28 pages addressing what it said was the "key evidence on cost of cure and defective value". In my view the approach of Glencore to this trial was not in accordance with its duty to help the Court to further the Overriding Objective of dealing with matters justly and at proportionate cost. In my view it would not be in furtherance of the Overriding Objective for the Court to attempt to deal with each and every submission raised or to address every piece of evidence. The Court has read the submissions and has had the benefit of both hearing the evidence and referring to the daily transcripts where necessary. The Court has set out its reasons for its conclusions on the issues which it determines necessary to make findings but having regard to the matters referred to above does not address in the judgment all the submissions advanced.

BPOI objected that four matters in Glencore's opening skeleton raised issues that were not pleaded and could not be fairly dealt with. They were (in summary) as follows:

that the loss should be treated as the loss to the BP group generally;

that CIG (the independent expert) was an agent of the parties;

that there was an amendment to the sales contract reflected in the documentary instructions; and

that the contract incorporated the Russian terms GOST with the result that there was a contractual limit of 2ppm of organic chloride.

In my view, for reasons which will be apparent from the discussion below, it was not necessary to deal with these issues in order to resolve the issues in the case so I do not address this objection further.

It was submitted for Glencore that there was inadequate disclosure by BPOI, and examples of the alleged shortcomings are given in the Annex to its Closing Submissions.

It was said that Glencore's "key concern" was that despite the group-wide approach taken within the BP group (as confirmed in Mr Earl’s cross examination), BPOI has sought "artificially to isolate itself, for the purposes of disclosure, from the other relevant BP group companies involved in dealing with the Cargo"; the relevant events concerned close coordination between several BP group companies, including BPOI, BPOESA, BPESE and BP Shipping; and it is "highly likely" that BPOI's approach to disclosure has deprived the Court of relevant documents.

It was therefore submitted for Glencore that insofar as there is any doubt about what a particular BP document means, or about what any BP group entity did, and that doubt may have been resolved by documents within the possession of one of the BP group entities involved in the arrangements for the Cargo, the Court should resolve that doubt in Glencore's favour.

Glencore previously sought permission to rely on an amended defence which sought to plead that:

Permission was refused for these amendments (referred to as Category 3 amendments) by Butcher J. I note in particular the judgment of Butcher J at [26]:

Given that permission was refused, the scope of disclosure reflected the issues in the case and the relevance of documents to the issues cannot be established merely by reference to evidence in cross examination of the coordination role carried out by BPOI.

Further, reliance on a failure to disclose documents held by BP Shipping in relation to finding ships to carry the Cargo does not establish a failure to comply with disclosure obligations in circumstances where Glencore sought permission from Butcher J to amend the pleadings in relation to the claim for storage and transportation costs, and to plead a positive case that BPOI's chartering arrangements in respect of the Cargo were unreasonable (referred to as the "Category 2 amendments").

I note that at [15] of the judgment, Butcher J noted that further disclosure would be required if the Category 2 amendments were allowed:

In the light of the foregoing, I do not propose to deal with all the detailed complaints concerning disclosure raised by Glencore in its Annex. I do not accept the submission that the late failure to disclose the Tupras documents illustrates "inappropriate conduct as to disclosure throughout the course of the proceedings” or that it raises significant concerns about its disclosure on value and more generally: the failure to identify these particular documents does not justify such an inference.

In support of its submissions that the Court should resolve doubts in Glencore's favour (paragraph18 of its Closing Submissions) Glencore relied on the principles discussed in Herrington v. British Railways Board[1972] AC 877 at pps 930-931 where Lord Diplock stated that:

In my view the principles stated by Lord Diplock have no application in the circumstances of this case and it is fanciful to suggest otherwise.

Glencore also submitted that it was "notable" that BPOI chose not to tender evidence from either (i) Oliver Williams, despite his “crucial role” in making the arrangements with Castellon, or (ii) anybody in BPOI's Operations team (such as Martin Bradshaw or Joshua Graham), who were responsible for dealing with (amongst other things) all of the sampling and analysis of the Cargo (and who might also have been able to provide informed evidence on CoQ 92).

In my view Glencore have not established that adverse inferences should be drawn having regard to the principles and approach discussed in Magdeev v Tsvetkov [2020] EWHC 887 (Comm) in particular the requirements at [154 (ii)] to set out “clearly (i) the point on which the inference is sought (ii) the reason why it is said that the "missing" witness would have material evidence to give…” In my view these requirements have not been satisfied. I would also note the observations of Cockerill J at [150]:

Firstly I set out the evidence of the contemporaneous documentary evidence, so far as material.

On 1 April 2019 there was an email from Mr Wawrzyniuk of Glencore to Ms Behtash at BPOI:

On 2 April 2019 Ms Behtash responded to Mr Wawrzyniuk:

On 2 April 2019 there was an email from BPOI Contracts Team to Ms Pelyak at Glencore: "Please find attached confirmation of trade E190006544/1".

Attached to that email was the confirmation as follows:

In response on the same day Ms. Pelyak responded to BPOI:

That contract (referred to below as the “Glencore Sales Contract”) included the following provisions as paragraphs 3 and 8 (numbering of subparagraphs added to paragraph 8 for convenience):

QUANTITY AND QUALITY SHALL BE DETERMINED IN ACCORDANCE WITH STANDARD PRACTICE OF THE LOADING TERMINAL.

SAVE FRAUD OR MANIFEST ERROR, THE FINAL AND BINDING NET US BBLS SHALL BE THE GROSS B/L QUANTITY MINUS STRAIGHT DEDUCTION OF WATER AND SEDIMENTS, AS PER QUALITY CERTIFICATE ISSUED AT LOAD PORT, MULTIPLIED BY THE US BBLS/MT CONVERSION FACTOR IN ACCORDANCE WITH STANDARD PRACTICE OF THE LOADING TERMINAL.

THE BILLS OF LADING AND CERTIFICATES OF QUANTITY AND QUALITY WITH RESPECT TO THE CARGO LOADED SHALL, EXCEPT IN CASES OF FRAUD OR MANIFEST ERROR, BE CONCLUSIVE AND BINDING ON BOTH PARTIES FOR INVOICING PURPOSES BUT WITHOUT PREJUDICE TO THE RIGHTS OF EITHER PARTY TO FILE A CLAIM FOR QUANTITY AND/OR QUALITY.

ANY CLAIM FOR QUANTITY DISCREPANCIES WILL BE PASSED ON, AND WILL BE SETTLED ONLY TO THE EXTENT THAT SAID CLAIM IS RECOVERABLE FROM SELLER'S SUPPLIER. SELLER SHALL HOWEVER MAKE ALL REASONABLE EFFORTS TO RECOVER FROM SELLER'S SUPPLIER ANY COSTS, LOSSES OR DAMAGES FOR WHICH BUYER HAS SUBMITTED A CLAIM.

QUALITY SHALL BE AS PER THE LOADING TERMINAL CERTIFICATE OF QUALITY TO BE FINAL AND BINDING FOR BOTH PARTIES, EXCEPT FOR FRAUD OR MANIFEST ERROR.”

On 3 April 2019 there was a response from BPOI Contracts Team to Ms Pelyak and in the attachment BPOI set out their response on the detailed provisions in the sales contract provided by Glencore as follows:

In turn Glencore responded on 3 April 2019 by email from Ms Pelyak to BPOI Contracts Team:

The attachment read as follows:

On 4 April 2019 BPOI Contracts Team responded to Ms Pelyak, the attachment reads as follows:

On 8 April 2019 Ms Pelyak responded to BPOI Contracts Team, stating in the attachment [so far as material]:

On 9 April 2019 there was an email from a Mr Graham for BPOI to Ms Pelyak providing documentary instructions to Glencore:

It is not in dispute that the Cargo was delivered, as were the shipping documents. No other written or oral response was made to the email of 8 April 2019 from Glencore.

It is BPOI's case that a binding contract of sale was made on 2 April 2019 in writing pursuant to the ordinary principles of 'offer' and 'acceptance'; and this was the express and objective intention of the parties, as stated in the relevant exchanges. [APOC, paragraphs 3-5]

Thus, as pleaded by BPOI, the contract of sale was:

either the "recap" including the GT&Cs; or

the recap and certain express terms of the Glencore Sales Contract sent on 2 April which were mutually agreed, namely clauses 3 and 8 (subparagraph 1 and subparagraph 3). [Amended particulars of claims paragraphs 7 and 9]

In opening oral submissions, counsel for BPOI stated that BPOI no longer advanced the alternative pleaded case.

Glencore's pleaded case is that either:

When Glencore (Ms Pelyak) replied to BPOI expressing its consent to some of the proposed amendments but otherwise maintaining the position set out in its detailed sale contract of 2 April 2019, this amounted to a counter offer by Glencore on 3 April 2019 and that this was accepted on 4 April 2019, when BPOI replied to Glencore stating 'We are pleased to have concluded this further business with you' (which is referred to in this judgment as "Glencore Alternative 1 -3/4 April exchange"); or

by its e-mail of 8 April 2019, Glencore made its own counter-offer on the same terms as Glencore's (later) message of 3 April 2019. This counter-offer was accepted by BPOI by its subsequent conduct, in particular by providing its documentary instructions to Glencore on 9 April 2019 and/or accepting the cargo documents and/or letter of indemnity and/or the Cargo and/or by not objecting to the amendments in any subsequent communications (which is referred to in this judgment as "Glencore Alternative 2-Last shot").

At trial Glencore pursued the alternative abandoned by BPOI of a partial adoption of Glencore's terms and BPOI does not object to this alternative being considered by the Court. For convenience I shall refer to this as "Glencore Alternative 3-Partial case".

This alternative is that when Glencore (Ms Pelyak) replied to BPOI on 3 April expressing its consent to some of the proposed amendments but otherwise maintaining the position set out in its detailed sale contract of 2 April 2019, this amounted to a counter offer by Glencore on the terms of its original detailed contract of 2 April and that this was accepted on 4 April 2019, when BPOI replied to Glencore stating “We are pleased to have concluded this further business with you.”

It was submitted for Glencore that the parties contemplated that there would be a formal sale contract and the Court should be slow to find that the parties intended to contract solely on the basis of the Recap. However in its opening submissions Glencore focused on Alternative 2 (last shot) rather than Alternative 1, and appeared to acknowledge that rather than reach an agreement on 4 April, "both parties maintained their proposed terms" (paragraph 102.3).

In my view, the fact that the parties contemplated that there would be a formal sales contract does not determine whether in fact a contract was subsequently concluded on the terms of the sales contract (or part of them).

I reject the submission for Glencore (paragraph 31 of its Closing Submissions) that the 4 April response amounted to "express agreement" to Glencore's latest proposal of 3 April. There was no express agreement in that email of 4 April to Glencore's "latest proposal”: there was no express reference or response to the detailed comments of the email of 3 April. In my view the phrase "We are pleased to have concluded this further business with you" is not sufficient to lead to the conclusion that viewed objectively, by its email of 4 April BPOI accepted the terms in the Sales Contract as amended by the Glencore proposals in its email of 3 April. A trade had been concluded on the terms of the Recap and the phrase concerning the "conclusion" of the "business" can be interpreted in this light. Even if it were to be given a broader meaning, the intention of the parties has to be considered having regard to the entirety of the relevant exchanges and the email from BPOI expressly stated that “proposed amendments” were rejected “unless expressly agreed”. Glencore submitted (footnote 5 to paragraph 31.2 of its Closing Submissions) that those words were intended to operate only prospectively. I do not accept that as the "plain intention" of the words. There is no reason to limit the natural meaning of the words "we hereby reject any proposed amendments" [emphasis added] to amendments proposed only after the date of the email.

Although the issue of the intention of the parties is to be viewed objectively, I note that the argument which Glencore now advances is inconsistent with the email of 8 April from Glencore following the email of 4 April in which Glencore, far from regarding the contract as having been concluded, in effect continued the negotiations and "maintained" its comments.

In my view it cannot be said that objectively BPOI accepted the terms of the Glencore Sales Contract as proposed in Glencore's email of 3 April by its email of 4 April.

It is convenient then to take Alternative 3, which is Glencore's case that on 3 April 2019 (or 4 April 2019 when BPOI sent its email) the parties had reached agreement on such of the detailed terms which had been expressly accepted in the correspondence and those terms formed part of the sale contract. In other words, this is a contention that there was a partial adoption of the terms in the Glencore Sales Contract insofar as some terms had been “agreed”.

In the 3 April email, BPOI said at the outset:

It was submitted for Glencore that:

the natural meaning of the words “subject to the following” in the 3 April email is that BPOI agreed to Glencore’s proposals save insofar as amendments, deletions or additions were put forward (paragraph 27.3 of its Closing Submissions); and

this interpretation of the words “subject to the following” is "analogous” with the “typical "accept/except" approach to contract-making in the oil trade” whereby the counterparty "accepts" all of the proposed terms "except" those that are expressly stated in the response: New Hampshire Insurance v MGN Ltd [1996] 5 Lloyds Rep 103 per Staughton LJ at p108 (paragraph 27.4 of its Closing Submissions)

The passage in New Hampshire Insurance to which Glencore referred the Court reads as follows:

In my view that analogy is of no relevance to the objective assessment of the intention of the parties in this case or to the meaning of “subject to the following”: Staughton LJ in New Hampshire Insurance was referring to a particular process among commodity dealers or chartering brokers. There is nothing to suggest that that process was in the contemplation of the parties here. This was a specific negotiation by two parties in relation to the terms of a particular contract when no particular commercial matrix is pleaded as relevant to the intention of the parties to create a legally binding agreement.

It was submitted for Glencore that the words "subject to" in BPOI’s email of 3 April could not be conditional on Glencore agreeing to its proposed amendments (paragraph 27.2 of its Closing Submissions). Further it was submitted (paragraph 27.9 of its Closing Submissions) that it was "uncommercial" for BPOI to adopt a position whereby until every "i" was dotted and "t" crossed BPOI could renege on those provisions.

In my view it is a question of construction of the email whether the parties intended to be bound by the 3 April email as Glencore contends (the relevant legal principles are set out later in this judgment but are common ground).

Whilst the language is capable of bearing the meaning for which Glencore contends, that BPOI agreed to such of Glencore’s proposals save insofar as amendments, deletions or additions were put forward, the issue is not whether the parties had reached agreement within the framework of the negotiations on specific points but whether the parties intended by that email and that phrase in particular, that a binding agreement should come into effect at that point which incorporated only those certain terms which were not in dispute. In my view this is not the natural meaning of the language “We are pleased to confirm our agreement to the terms set out in your fax dated 2nd April 2019 subject to the following…”

However, in reaching a conclusion the Court has to consider not only the words used but also the context, including the commercial consequences of the rival interpretations.

When the phrase is read in the context of the rest of the email it is clear that BPOI does not intend to be bound at that point but is part way through its negotiation: thus BPOI proposes (“Please delete”) that certain matters should be dealt with, not in accordance with Glencore’s Sales Contract but in accordance with the GT&Cs (which were expressly incorporated into the Recap). For example under “Delivery” the email states:

In accordance with the authorities, where there are two possible interpretations, the Court is entitled to prefer the construction which is consistent with business common sense and to reject the other. Whilst I accept that any commercial negotiation is likely to proceed by narrowing the areas of disagreement, it is in my view nevertheless in accordance with business common sense to conclude that viewed objectively, the parties did not intend to conclude a binding agreement (which varied the Recap) (unless and) until the negotiations had concluded and it is therefore implicit that unless and until that point is reached, it was open to a party to "renege" on the provisions it has "agreed" in the course of the negotiations.

Glencore responded to that email on 3 April with its comments, and the cover email, far from suggesting that the parties had reached a concluded agreement incorporating some of the terms proposed by Glencore, merely stated:

Viewed objectively there is no basis to conclude that on 3 April the parties had agreed a binding contract on the terms of the Recap and such of the terms as had been "agreed" at that point.

Glencore submitted (paragraph 27.8 of its Closing Submissions) that the BPOI email of 4 April "reconfirms" the accept/except type of approach to contract making. In my view there is no general rule which is applicable here and the language of that email indicates no such intention. Glencore sought to rely in isolation on the terms underlined below but in my view the paragraph in that email has to be read and construed in its entirety in order to establish the objective intention of the parties:

The paragraph does not say that, where terms have been partially agreed, this will amount to a binding agreement. It is directed at the need for express agreement as opposed to implied agreement. It does not say that an agreement will be made part way through negotiations in circumstances where negotiations are not concluded, on part only of the terms under consideration.

In my view the construction advanced by Glencore of the 4 April email and that paragraph in particular would be contrary to commercial reality. The parties were engaged in a negotiation of the contract. In the course of the correspondence the issues that were acceptable to the parties were identified and the disputed issues were identified. It would in my view be wholly uncommercial for the court to construe that paragraph such that even though the parties had not concluded their negotiations on the entirety of the contract, the parties had concluded a binding agreement part way through the negotiations solely on the terms which were not in dispute.

Again in my view, Glencore now advances a case which is inconsistent with its position at the time: in its response to the 4 April email on 8 April there is no indication that Glencore regarded the parties as having reached a binding agreement on the terms that had been agreed; rather Glencore sought to impose its terms in relation to the disputed clauses by its statements that it would not engage further and would not reply unless there was a change in BPOI's position.

In my view construing the language used in the context of the entire exchanges and having regard to the commercial implications, neither basis advanced by Glencore establishes that the intention of the parties was to conclude a binding agreement part way through the exchanges on the terms that were "agreed" notwithstanding the continued further exchanges in relation to the outstanding issues.

This is the alternative that by its e-mail of 8 April 2019, Glencore made its own counter-offer on the same terms as Glencore's (later) message of 3 April 2019. This counter-offer was said by Glencore to be accepted by BPOI by its subsequent conduct, in particular by providing its documentary instructions to Glencore on 9 April 2019 and/or accepting the cargo documents and/or letter of indemnity and/or the Cargo and/or by not objecting to the amendments in any subsequent communications.

Glencore submitted that:

Even if there were remaining terms in dispute after the BPOI 4 April email, those terms were subsequently agreed in Glencore's favour by reason of Glencore's "last shot" in its message of 8 April and BPOI's subsequent performance of the contract without further discussion about its terms (paragraph 33 of its Closing Submissions).

Typically, an “offer to buy containing the purchaser's terms which is followed by an acknowledgement of purchase containing the seller's terms which is followed by delivery will (other things being equal) result in a contract on the seller's terms”: Tekdata Interconnections Ltd v. Amphenol Ltd[2009] EWCA Civ 1209 per Longmore LJ at [1]; this is the "last shot" principle, which is commonly applied in sale of goods cases: see Benjamin on the Sale of Goods (11th edition) at 2-013 (paragraph 102.4 of Glencore’s opening skeleton).

This is not one of those "unusual cases" where the "last shot" principle was not intended to apply. On the contrary, the understood practice in the industry and between the parties is that since Glencore was the seller and had issued the original sales contract, its last comments would trump BPOI's: Ms Pelyak's witness statement at paragraph 16 (paragraph 102.5 of its opening skeleton).

The wording in BPOI's 4 April email was not sufficient to displace the "last shot" doctrine, especially given the understood practice in the industry that the seller's terms will prevail: Ms Pelyak's witness statement at paragraph 16.

BPOI did not challenge the 8 April email but proceeded to perform the contract (paragraph 35.3 of its Closing Submissions).

BPOI submitted as follows:

The 8 April email does not reiterate the disputed terms previously proposed by Glencore, which had lapsed following their rejection by BPOI. There was, therefore, no "counter-offer" of any terms made in this document.

The 8 April email expressly, and correctly, refers to the "clauses in dispute". It thereby recognises that those clauses had not been agreed by BPOI in any previous correspondence. That is fatal to construing this document as a counteroffer, accepted by conduct.

It makes no sense for Glencore to submit that BPOI accepted the disputed terms "by not objecting to the amendments in any subsequent communications", given that the 8 April email stated in terms that Glencore would "no longer reply to any further correspondence relating to this matter unless there is a change in your position". Glencore cannot rely on the fact BPOI did not correspond further in these circumstances.

Glencore's case of acceptance by conduct is inconsistent with the parties' express intentions. In its email of 4 April, BPOI had stated that: "Neither failure or delay in responding, nor performance of the agreement, shall constitute acceptance to any terms which have not been expressly agreed between the parties". Likewise, in its 8 April email, Glencore stated: "For the avoidance of doubt, nothing shall be deemed or constitute acceptance or consent on the clauses in dispute".

This case is not an example of a “battle of forms”. That approach applies in favour of "the party whose terms and conditions are in play and unanswered at the time that the work is done or the goods delivered". It does not, by contrast, apply where there is "evidence of the parties' objective intention that the last shot should not prevail". The Court must, in any event, consider the documents as a whole: TRW Ltd v. Panasonic Industry Europe GmbH [2021] I.L. Pr. 42 at [29], [32], [35].

In my view, the email of 8 April was capable of amounting to a counter-offer on the terms set out in the Glencore Sales Contract since whilst the attachment to the email did not set out the terms in full it clearly refers to the sales contract and the terms thereof. It read (so far as material):

It therefore can be construed as a counter-offer on those terms referring expressly both to the Glencore Sales Contract which was sent with the email of 2 April and the comments of 3 April 2019 which are “maintained”.

Further, in my view, the fact that in the email attachment Glencore refers to the "clauses in dispute" merely recognises that those clauses had not been agreed by BPOI, but nor were BPOI’s proposed changes accepted by Glencore; thus there was at that date no agreement to the terms of the Glencore Sales Contract. The relevant paragraph read:

In my view that paragraph does not prevent the email of 8 April 2019 from amounting to a further counter-offer to BPOI (on the terms of the Glencore Sales Contract) which is then capable of being accepted by conduct.

However given that the 8 April email stated that Glencore would "no longer reply to any further correspondence relating to this matter unless there is a change in your position", in my view Glencore cannot rely on the fact BPOI did not correspond further in relation to the terms specifically as acceptance of the counter-offer.

Glencore also relies in the alternative on the conduct of BPOI in providing its documentary instructions to Glencore on 9 April 2019 and/or accepting the cargo documents and/or letter of indemnity and/or the Cargo, and thus the crux of this issue is therefore whether this is a case where the “last shot” principle applies.

In its opening skeleton Glencore referred to the “last shot” principle as “typical” and relied on a sentence from the judgement of Longmore LJ in Tekdata.

The full quotation from Tekdata is as follows:

I also note Lord Dyson’s observations in that case at [23]-[25]:

From that authority it seems to me that while the “general rule” is that the traditional offer and acceptance analysis applies in “battle of the forms” cases, this assumes that:

there is a “battle of the forms”; and

even if that is the case, the analysis depends on an assessment of what the parties must objectively be taken to have intended.

This was not in my view a battle of the forms. The parties were not in dispute as to whether or not the BP General Terms & Conditions or the Glencore terms should apply; both parties had accepted when the Recap was agreed that the GT&Cs applied and the parties were in negotiation as to whether the contract already agreed should be varied to reflect the terms of the Glencore Sales Contract. It cannot be the case that any negotiation of any contract which gives rise to a dispute can be said to amount to a “battle of the forms” merely because one party sends a draft contract to the other and there is then a back and forth in writing in the course of the negotiations.

This is not a case where the rationale for the “last shot” principle identified by Lord Dyson (i.e. that it promotes a degree of certainty to promote effective commercial relationships) can be said to exist.

Even if this case were to be treated as a “battle of the forms”, the question is what the parties must objectively be taken to have intended.

I accept that BPOI did not pursue the outstanding issues in correspondence (or by telephone) following the email of 8 April.

In assessing what the parties must objectively be taken to have intended, I have regard to the contemporaneous evidence and in particular the statement by BPOI in its 4 April email that:

Although Glencore submitted in its oral closings that the decision in TRW v Panasonic[2021] EWCA Civ 1558 was “very different”, in my view an analogy can be drawn from that judgment and I note in particular the following:

Glencore also submitted in oral closings that the paragraph in the 4 April email was only a “penultimate or earlier shot” which was overridden by the last shot. It was submitted that this case was like Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 W.L.R. 401, in which the putative anti-last shot term was just part of one party's terms.

Glencore referred to the summary of Butler Machine Tool in Chitty on Contracts at [4-046] to [4-047] in support of its submission that wording such as that relied on by BPOI is capable of being superseded by subsequent conduct.

The following extract from the commentary in Chitty of Butler at [4-047] is of particular note:

It seems to me therefore that Chitty takes the view (by reference to the decision in Butler Machine Tool) that it is possible by careful drafting to prevent a contract coming into effect through the battle of forms.

It was submitted for Glencore (paragraph 35.1 of its Closing Submissions) that:

The evidence of Ms Pelyak, which was not challenged in cross examination, was as follows:

The evidence of Ms Pelyak merely reflects her subjective view. There is no contemporaneous documentary evidence to support her view and it does not appear to be directed at a “battle of the forms” in its usual sense but rather at which party issued the contract.

As stated above, Tekdata makes clear that the question of the “last shot” always depends on an assessment of what the parties must objectively be taken to have intended.

The evidence of Mr Hague (relied upon by Glencore) in my view provides no assistance as to the intention of the parties as to the effect of the exchange of emails on a contract coming into existence. He merely stated in his witness statement that:

It is difficult to see how the wording of BPOI in its 4 April email could have been clearer. It said:

Whether or not it was “boiler plate” as Glencore suggest is irrelevant. There is nothing to suggest that it was not intended to have a meaning or should be disregarded merely because it may be inserted into BPOI emails as standard (as to which there is in any event no evidence).

In my view the language of the 4 April email is clear and unambiguous and Glencore has not identified any respect in which the language can be said to be ambiguous.

Glencore’s case on this alternative therefore seems to depend on its submissions that the BPOI language was only a penultimate shot; but as discussed above, Butler Machine Tool does not provide assistance to Glencore in this regard where the language, as here, is clear as to the intention of the parties.

BPOI had made clear by its email of 4 April that it would not be bound by the disputed clauses by a failure to respond or by performance. Glencore’s response was not to reject this provision but to state that in relation to the clauses in dispute “nothing shall be deemed or constitute acceptance or consent” of such clauses.

For the reasons set out above I find that the “last shot” principle does not apply in the circumstances of this case.

For all these reasons I therefore find that:

There was no agreement reached between the parties on all or part of the terms of the Glencore Sales Contract.

There was however a contract formed on 2 April 2019 by the exchanges of 1 and 2 April 2019 between Mr Wawrzyniuk and Ms Behtash.

Whilst I accept that this was not the original intention of the parties, this is nevertheless the result of the subsequent exchanges given that no subsequent agreement was reached: as noted by Chitty (quoted above) the draftsman (in this case BPOI) has achieved a “stalemate situation”, although in this particular case (unlike in Chitty) it does not result in no contract between the parties but a contract on the terms of the Recap including the GT&Cs.

The remainder of the issues on liability will be addressed in light of my findings above on Issue 1, the terms of the contract. I do not intend to address the various alternative cases which might have applied (and were advanced in submissions) had a different conclusion been reached on the terms of the contract as it is not necessary to do so in order to reach a conclusion on liability.

Accordingly it is not necessary for me to decide Issue 2 (Is BPOI's claim precluded under clause 8(5) by reason of COQ 92?) and Issue 3 (What is the proper construction and impact of clause 8(1)?) of the Agreed List of Issues for Closing.

I therefore turn to consider Issue 4, which in the light of my findings above I reformulate as follows:

I propose therefore to disregard the reference in Issue 4 as formulated by the parties to a breach of paragraph 3 of the Glencore Sales Contract given my findings above (although I note in passing the submission for BPOI that the quality clause is essentially the same on both parties' cases).

In the Recap, Glencore agreed to supply REBCO of "Quality: Urals ex Primorsk / UL in Seller's option".

Section 59.1 of the BP GT&Cs, provided that:

It was submitted for BPOI that:

the word "usual" is "controlling" and the time and place are subsidiary; it must be a usual Urals cargo, and time and point of loading means that one can vary within what is usual according to what is available at the time and place of loading, but it does not entitle delivery of something that is wholly unusual at any time; (Day 7 45:7-45:12)

Glencore's interpretation is unreasonable and absurd because if it was right there could never be a quality claim, because the only thing that is usual at the precise time and point of loading is the cargo actually loaded, and so would mean that whatever cargo is actually loaded is by definition the usual for the time and point of loading, and by definition is contractual (Day 7 46:1-46:9)

It was submitted for Glencore (paragraphs 148-149 of its opening skeleton) that:

If (assuming that the Cargo contained elevated organic chlorides) that was all that was available at the time at the port, the Cargo complied with the contract.

BPOI had not discharged its burden of proving that the Cargo contained elevated levels of organic chlorides on delivery at Ust-Luga (paragraph 60.2 of its Closing Submissions).

The court was referred to the principles of contractual interpretation summarised by Popplewell J in Lukoil Asia Pacific Pte Ltd v. Ocean Tankers (Pte) Ltd[2018] EWHC 163 (Comm) at [8]:

There are two potential meanings of the phrase "the quality shall be…the quality of such Crude Oil as usually made available at the time and delivery point" advanced by the parties.

BPOI gives precedence to the term "usually" and the commercial consequence/absurdity of allowing a seller to deliver contaminated oil if that was the only oil available.

Glencore submitted that the Court must give effect to the words "at the time" within the phrase, and thus the Cargo need only be of the quality then available at the loading point. Glencore submitted that this just reflects the allocation of risk between the parties and that it had been agreed that the buyer should bear the risk of uncertainty about the quality of the oil.

In my view the natural meaning of the word "usually" made available connotes what typically or normally happens. It does not therefore mean the oil which was available at the particular time (as in effect Glencore contend) since in my view that would give no meaning to the term "usually". I do not understand Glencore to submit that the oil usually made available (i.e. at other times) was oil with elevated levels of organic chlorides.

In my view Glencore's commercial justification for their contrary interpretation removes most, if not all, the protection for the buyer in relation to the quality of the oil to be delivered. There is no evidence to support its submission that this reflects the allocation of risk nor that if it had not had this meaning, detailed specifications of the oil would have been agreed.

To the contrary, the court is entitled to have regard to the other provisions of the contract and the factual background. It was agreed that the oil would be tested and it is to be inferred that the testing was to ensure that the oil was indeed of the usual quality.

Balancing the implications of the rival constructions against an examination of the relevant language in the contract, in my view Glencore was obliged to deliver REBCO that was of the usual quality at the time it was loaded and this does not permit Glencore to deliver oil with elevated levels of organic chlorides which would not have been "usual" quality within the meaning of section 59.1.1.

I turn then to consider the second question as posed by Glencore: whether BPOI has discharged its burden of proving that the Cargo contained elevated levels of organic chlorides on delivery at Ust-Luga (paragraph 60.2 of its Closing Submissions).

BPOI relies on 2 samples in support of its case that testing showed that the Cargo was contaminated by organic chlorides at a concentration of around 11.9 to 15.7 ppm. The samples were said to be taken from the load port (Ust-Luga) and at the discharge port (Wilhelmshaven).

A composite sample of the Cargo was taken at Ust-Luga. The sample was tested by Intertek at Sunbury Technology Centre using an ASTM D4929 test. The results, as recorded in a test report dated 3 May 2019, were that:

The naphtha fraction of the composite sample contained 61ppm of organic chlorides.

From this result, the concentration of organic chlorides in the crude oil sample was calculated to be 11.9 ppm.

A sample of the Cargo was taken at Wilhelmshaven. The sample was tested by Nord-West Oelleitung GmbH (“NWO”) using an ASTM D4929 test. The results, as recorded in a test report dated 23 April 2019, were that:

The naphtha fraction of the composite sample contained 83.5ppm of organic chlorides.

From these results, the concentration of organic chlorides in the crude oil sample was calculated to be 15.7ppm.

It was submitted (paragraphs 137-142 of Glencore's opening skeleton) for Glencore that:

the burden is on BPOI to prove that the Cargo had elevated levels of organic chlorides contrary to the quality provisions of the contract;

the evidence of testing by Intertek of a sample taken on board the Alexia and the testing by NWO of a discharge port sample is irrelevant because that sampling and analysis was not in accordance with the (good) standard practice of the loading terminal; and

those tests are unreliable and insufficient to discharge the burden of proof.

In response to those submissions, it was submitted for BPOI that:

It is common ground between the experts that the elevated levels of organic chlorides asserted by BPOI in this action would be considered abnormal and potentially damaging to refinery equipment.

The quality as stated in CoQ 92 cannot be reconciled with the findings of the experts based on the samples tested by Intertek and NWO.

The obvious disparity in organic chlorides content as between CoQ 92 and later tests suggests that the Ust-Luga determination was either not performed or was erroneously performed and incorrectly reported.

The chemistry experts agreed that the organic chlorides content result reported in CoQ 92 was on-specification but the levels reported by Intertek and NWO were off-specification and would be considered abnormal for REBCO.

In particular, in their joint memorandum the chemistry experts agreed that:

There is no industry-wide applied standard limit for the maximum allowable concentration of organic chlorides in crude oil. However, the subject REBCO loaded to the MT "Alexia" was certified at the load port against the Russian National Standard GOST R 51858. This standard includes a limit on the organic chlorides content in the naphtha fraction of the crude oil of maximum 10 mg/kg. Taking into account the expected naphtha fraction of a REBCO crude oil (around 20%), a specification limit of maximum 10 mg/kg organic chlorides in the naphtha fraction would be roughly equivalent to a specification limit of maximum 2 mg/kg organic chlorides in the crude oil as a whole (Joint Memorandum paragraphs 3 and 4).

There was a significant discrepancy in the levels of organic chlorides found in the samples tested by Intertek Sunbury and the NWO laboratory when compared to the results reported in the load port CoQ 92 (Joint Memorandum paragraph 10).

Whilst the organic chlorides content result reported in CoQ 92 (less than 1 mg/kg) was on-specification when compared to the GOST R 51858 limit, the levels reported by Intertek Sunbury (61 mg/kg in the naphtha fraction) and the NWO laboratory (between 82.5 mg/kg and 86.2 mg/kg) were off-specification and would be considered abnormal for REBCO and potentially damaging to refinery process equipment, without further treatment, for example, by blending (Joint Memorandum paragraph 11).

There are three issues which fall to be considered:

In order to determine whether the Cargo is off-specification, is it permissible under the contract terms (namely section 9.1 of the GTCs) to have regard to the samples and test results from Intertek and/or NWO?

If the samples or any of them and the test results are admissible as evidence of the quality of the Cargo, are the samples and the tests reliable evidence such that they can be regarded as having probative value?

If the samples and tests have probative value what conclusions should be drawn in light of the discrepancy between CoQ 92 and the results of the Intertek and/or NWO samples?

Section 9.1 and 9.2 of the GT&Cs provide as follows (so far as material):

It was submitted for Glencore that:

Glencore submitted (in substance and by analogy with its submissions on Clause 8(1) of the Glencore Sales Contract) that this agreement in Section 9.1.1(c) is an agreement as to how quantity and quality shall be determined "for all purposes under the contract" not just for the process at the loadport (paragraph 109-110 of its opening skeleton). Glencore submitted that it was "analogous" to a contractual provision that requires quality to be determined exclusively in accordance with a particular testing method or standard. Glencore cited a number of authorities as illustrative: Veba Oil v. Petrotrade[2002] 1 Lloyd's Law Reports 295 discussed in The Kriti Palm[2007] 1 Lloyd's Rep. 555; Agroexport v. Goorden Import [1956] 1 Lloyd's Rep 319.

BPOI submitted (paragraphs 59-64 of its Closing Submissions) that:

Section 9.1.1 (c) does not provide that the determination is conclusive, final, binding or definitive, nor does it exclude all other evidence. BPOI submitted that, by contrast, all the authorities relied upon by Glencore include the words "final" or "binding" or "definitive".

Glencore's interpretation would lead to absurdity as, if the loading terminal failed to make any determination, all evidence would be excluded.

There is no authority to support Glencore's interpretation and it is inconsistent with the provisions (in Section 9.2.1) which preserve the rights of the parties to file a claim for quality.

The key provision to be construed reads:

Applying the approach to construction summarised in Lukoil, the Court considers first the natural meaning of the language. There is nothing in the language which provides expressly that the taking of samples and analysis by the Loading Terminal's inspectors shall be conclusive and as a result the parties are precluded from challenging any such determination by reference to any other evidence.

If however there is any ambiguity in the words "for the purposes of determining the compliance of the Crude Oil …with the quality provisions" such that it is a possible interpretation (that it is to be inferred that this is the sole method of determining the compliance with the quality provisions), the natural meaning of the language has to be considered in the context of the contract as a whole.

In my view the structure of section 9 is that, having stated the procedure which will be adopted in order to take samples and analyse the Crude Oil, it then provides for certificates to be issued which it is to be inferred will reflect the result of that sampling and analysis. However, section 9.2.1 expressly states that such certificates:

In other words, section 9.2.1 does not say that the certificate is final and binding so far as quality claims are concerned.

In my view, when the language of section 9.1 is considered in the context of the section 9 as a whole, it is clear that section 9.1 provides a procedure for testing and analysis but it does not provide for that testing and analysis to be conclusive; and in my view, it would be contrary to the expressed intention of the parties to find that whilst the certificate which is issued by the Loading Terminal inspectors is not binding (by virtue of section 9.2.1) as to compliance with the quality provisions, the underlying sampling and analysis is nevertheless binding by virtue of section 9.1. It would have the result that a certificate issued by the Loading Terminal could not be challenged as to quality (provided that the Loading Terminal inspector followed the standard practice as to testing and sampling at the Loading Terminal) irrespective of the actual quality delivered. As stated in Lukoil:

In my view the construction of BPOI is consistent with business common sense.

For these reasons I find that section 9.1.1 does not have the effect of excluding all other evidence as to whether the Cargo complied with the contractual specification.

The experts were agreed that there is an "overall paucity of information available in terms of the identity and provenance (for example, due to a lack of seals/seal numbers) of many of the tested samples relating to the MT "Alexia" REBCO, contrary to what would be considered good practice in terms of sample custody transfer between parties" (Joint memorandum paragraph 5).

However, in relation to the sample tested by Intertek, the agreed evidence of the experts was that notwithstanding the failure to comply with standards concerning the provenance of the samples, the Intertek test "was likely" to have been a "deck composite" sample taken after loading at Ust-Luga:

The position was confirmed by Mr Minton in his evidence in cross examination:

Although Glencore point to the evidence of Mr Jones that Mr Jones agreed that "sample provenance remains a problem in this case", I did not understand him to withdraw from the agreed position set out in the Joint Memorandum.

As to the significance of the fact that this was a deck sample, Mr Minton's evidence in cross examination was in substance that this made no difference to the conclusion concerning whether the sample was contaminated since his evidence was that it was agreed between the experts that the vessel could not have been the source of the contamination. His evidence was as follows:

In relation to the NWO samples the experts were originally unclear whether the samples from the test reports issued by the NWO laboratory on 23 April 2019 were automatic in-line samples drawn during discharge into NWO shore tanks 53, 54, 91, 93 and 112 (Joint memorandum paragraph 9).

However, in his second report Mr Minton stated as follows:

Although therefore the evidence of Mr Minton in cross examination was that it was unclear how many sets of samples were taken at the time of discharge and thereafter from the shore tanks, he agreed that the test report from NWO of 23 April 2019 was likely to be the results of automatic in-line samples and to reflect the quality of the Cargo being discharged from the Alexia. (Day 5 68:2-68:4) He also agreed that the test results were "abnormal”. (Day 5 68:18-69:2)

This supports the agreed position in the Joint Memorandum, where the experts agreed that:

Given this evidence as to the results of the in-line sampling, it is not necessary to resolve the issues which were raised by Mr Minton in relation to the samples which apparently were taken from various shore tanks.

The evidence of the level of contamination as shown by the in-line testing carried out by NWO is relevant evidence which can be taken into account in order to determine whether the Cargo met the contractual specification as to quality.

The significance of the NWO samples being samples on discharge (and not on loading) is in my view eliminated by the agreed evidence of the experts that the MT "Alexia" was not the source of the reported high organic chlorides content in the REBCO crude oil (Joint memorandum paragraph 14).

It is also noteworthy, given the objections raised by Glencore to the provenance of the samples, in relation to the samples tested both by Intertek and NWO that the experts were agreed that the test data suggested that all three samples – i.e. those used for CoQ 92, Intertek and NWO respectively – were drawn from the "same body of crude oil":

It was submitted for Glencore in its oral opening that:

However, the evidence of Mr Minton in cross examination was that ASTM D4929 is an alternative method to the GOST procedure such that either GOST or ASTM was permissible:

Glencore submitted that:

Mr Jones had speculated that, of the available procedures within test method ASTM D4929, Intertek had used procedure B; and

the experts assumed that both Intertek and NWO used procedure B but it is not possible to tell which method was in fact used by Intertek.

The experts were agreed that:

As to the manner of testing, the expert evidence was as follows:

I note that in his first report Mr Minton stated (at paragraph 7.17):

Accepting that expert evidence and therefore adopting a cautious approach to the Intertek results, it is nevertheless accepted by Mr Minton (and by BPOI) that procedure B was used on the samples taken by NWO. His evidence in cross examination was as follows:

Thus in answer to the question as to whether the samples taken by NWO can properly be compared to CoQ 92, it is clear on the evidence of Mr Minton that ASTM D4929 is an acceptable alternative.

The highest Glencore put their case is that testing should be done in accordance with the standard practice of the loading terminal. Glencore do not plead that the GOST procedure was agreed such that it would apply on a dispute and I see no relevance therefore to the position which would apply under GOST on a dispute.

Glencore raised a particular objection to the tests on the basis that Glencore was not invited to witness the testing. However this objection has no substantive weight in light of the conclusion of the experts referred to above that, "albeit it would have been beneficial to confirm this by joint witnessed analysis of samples in the same laboratory", given that the test data were aligned with the results of COQ 92 for other quality parameters, the experts were agreed that this would suggest that the samples had been drawn from the "same body of crude oil".

I note that in his supplemental report Mr Minton stated in this regard:

In my view this merely confirms the conclusions above concerning some of the uncertainties about samples and shore tanks but does not affect the validity of the overall conclusions concerning the relevance of the samples and the tests.

The experts agreed that there was a "significant discrepancy" in the levels of organic chlorides found in the samples tested by Intertek Sunbury and the NWO laboratory when compared to the results reported in the load port Certificate of Quality No. 92. (Joint memorandum paragraph 10)

Given the findings above that the samples and tests by NWO should be given weight the question is what conclusions should be drawn from the difference between CoQ 92 and the later test results.

In relation to the samples drawn at the time of loading, the experts agreed that there is insufficient information available on CoQ 92 to identify what sample was tested and who it was tested by. The experts agreed that this sample was reported to have an organic chlorides content of less than 1 mg/kg in the naphtha fraction of the crude oil, as determined by test method GOST R 52247, procedure B. (Joint memorandum paragraph 7)

Mr Minton's evidence in cross examination in relation to COQ92 was as follows (so far as material):

Mr Jones' opinion (as expressed in his report at paragraph 2.2.8) was that:

In cross examination Mr Jones confirmed that he formed the view that the determination at Ust-Luga was not performed or was erroneously performed having regard to the evidence from Intertek and NWO:

Glencore submitted that both expert witnesses were honest witnesses trying to assist the Court. I accept that submission.

Ms Pelyak gave evidence as to her "general understanding of the standard sampling and testing procedure at Ust-Luga". It was submitted for Glencore that she "was plainly an honest witness, doing her best to assist the Court…has extensive knowledge and experience of standard practice at Ust Luga insofar as it concerns the shipment of oil, and was able to assist the Court in that regard."

Whilst I accept that Ms Pelyak was doing her best to assist the Court, her evidence was shown to be based (in part) on conversations with a third person who did not give evidence to the court and for which Ms Pelyak was relying on her recollection. She changed her original evidence about testing of oil in shore tanks (in a second witness statement in January 2022) on the basis that her "understanding had developed" following a conversation in July 2021 with that third party. This inevitably cast doubts on the accuracy of her overall "understanding" which (at least in part) was reliant on statements by the third party which were not tested in Court. In any event her evidence was extremely general in nature and did not assist in resolving the question of whether the standard practice was followed in this case.

Glencore’s defence was that CoQ 92 was the only evidence which complied with the contractual requirement and that without the later tests there was nothing to say the oil was abnormal.

It is however important not to lose sight of the elevated levels of organic chlorides which were indicated by the later tests. This is not a case where the levels were close to the permitted parameters. The experts, despite their detailed analysis of samples and tests and the reservations as to the manner of recording samples and testing, were nevertheless clear that the Alexia Cargo was contaminated by organic chlorine compounds: Mr Jones' evidence in his report (paragraph 3.1.2) was that:

Mr Minton's in cross examination agreed:

According to the samples tested by both Intertek and NWO, the Cargo was outside the parameters allowed for organic chlorides by the standard test and for this purpose it is immaterial whether GOST or ASTM is used.

Whilst the precise testing method used by Intertek is not known, it should not in my view be disregarded entirely (nor was this the evidence of Mr Minton who merely referred to caution). Even, however, if the results from Intertek are disregarded, the NWO tests of in-line samples, that is in the line going from the ship to the shore tank, are consistently around 15 parts per million.

The experts were also agreed that the contamination did not come from the vessel itself.

Whatever practice was followed at the loading terminal, in light of the body of evidence concerning the contamination of the Cargo, CoQ 92 was incorrect as to the parameters of organic chlorides in the Cargo and I infer that the sampling and testing cannot have been in accordance with good standard practice. However even if good practice had been followed, under the terms of the contract CoQ92 is not binding for the purposes of determining quality and in the light of the evidence of the later tests CoQ92 is rightly referred to by BPOI as an "outlier".

For these reasons I find that:

the oil delivered was contaminated (by organic chlorides) and as such cannot be said to be of the quality usually delivered at Ust-Luga within the meaning of Section 59.1.1 of the GTCs; and

there was a breach of the Recap quality clause and Section 59.1.1 of the GTCs.

BPOI’s primary claim is for the Cargo’s diminution in value as a result of the organic chlorides contamination. BPOI’s case is that this amounts to US$5,960,095 as the difference between the market value of sound crude oil of about “Dated Brent + $0.53” and the value of contaminated crude oil of about “Dated Brent -$8.00”.

The delivery of a contaminated cargo in breach of contract amounts to a breach of warranty of quality. The measure of damages for such a breach is set out at sections 53(2) and 53(3) of the Sale of Goods Act 1979:

The issue between the parties in this case is whether the prima facie measure in section 53(3) applies or whether if section 53(2) applies, BPOI’s loss is (i) its liability to BPESE; or (ii) the cost of cure; or (iii) a “quasi” s53(3) measure (Issue 5.1).

Glencore raises 2 main objections to the application of the prima facie rule in section 53(3) in this case:

that there was no available market in which the buyer could sell the defective goods; and

the existence of the Sub-Sale to BPESE.

Glencore submitted that there was no available market for the contaminated crude at the time of delivery: that it was common ground between the experts that ‘initially’ there was no market at all for cargoes with elevated levels of organic chlorides (Joint Memorandum at paragraph 4) and at the very most, any “market” for a specific cargo only started to develop during the course of May and over the summer of 2019. It follows that there was no relevant “available” market, as the market must be available within a reasonable time of the breach: Benjamin at [16-068], [16-069].

The evidence of BPOI’s expert in the joint memorandum was that:

Ms Bossley’s evidence was:

In her second report Ms Bossley said:

The views of the experts are consistent with the factual evidence including that of Mr Haines.

I accept the evidence that initially there was no market for the contaminated oil.

However in my view this does not mean that the prima facie measure is necessarily displaced. Chitty on Contracts (34th edition) states at [46-419]:

Benjamin at [17-52] states:

I do not see that the sections of Benjamin relied upon by Glencore ([16-068], [16-069]) have any relevance as these relate to the measure of a seller’s damages rather than the buyer’s.

It is to be noted that Benjamin continues at [17-054] to consider the “cost of cure” as an appropriate measure:

Chitty alsostates at [46-421] that:

In the footnotes to [17-054] Benjamin refers to Hirtenstein v Hill DickinsonLLP [2014] EWHC 2711 (Comm) at [116]– [122]:

However that particular case concerned a defective luxury yacht. Leggatt J found that:

Leggatt J found that:

there was no market to value the goods if they had complied with the undertaking (measured at the time and place of delivery) as there was no market of the relevant kind for second-hand yachts as they were not fungible like commodities or even cars; and

it was “unreasonable to assess damages on the assumption that the defective yacht will immediately be sold” as the only likely buyer would have been looking to repair the yacht and would not have been sold immediately but within 18 months.

Unlike the position in Hirtenstein, in this case the Court is dealing with a commodity, there is a market price for goods of the contractual description and quality of the Cargo, and there is evidence by which the market value of the defective goods can be ascertained. In the circumstances it is in my view neither unreasonable nor unrealistic to assess damages on the assumption that the Cargo will be sold. Further, in my view the cost of cure is not a reasonable measure of loss in circumstances where the buyer (BPOI) is a trading company with no ability to “cure” the defect (other than by resale) and even if the sub sale is relevant, the sub buyer (BPESE) was not able to process the contaminated oil and itself “cure” the defect. Whilst ultimately the contaminated oil was treated by BPOESA in a way which rendered it useable in a refinery, BPOESA was neither the buyer nor the sub buyer. This is not a case therefore where it can be said that the only likely buyer would have been looking to cure the defect. It was equally possible that another trading company could have bought the oil and sold it on to a refinery (as in effect happened by BPOI buying back the Cargo from BPESE). It was submitted for Glencore that where a trader can, and in the event does, remediate by the assistance of an affiliate, the cost of cure is appropriate. This seems to me to disregard the separate legal personality of the BP entities and the fact that (as set out in the Agreed List of Common Ground) BPOI is an oil trading company carrying on business in the sale and purchase of crude oil and petroleum products and not a refinery.

On the facts of this case I therefore find that damages should be assessed by reference to the difference in value rather than the reasonable cost of cure.

Glencore accepted (paragraph 161 of its Opening Submissions) that even where s.53(3) does not strictly apply, nevertheless it may still be appropriate to assess the buyer’s loss by reference to the difference in value but excluding the temporal element: Choil Trading v. Sahara Energy [2010] EWHC 374 at [123] per Christopher Clarke J:

It was submitted for Glencore that even where there is an available market, the prima facie measure in s.53(3) – and a fortiori the “quasi” s.53(3) measure recognised in cases like Choil Trading – may be displaced where it is appropriate to take into account the position on the buyer’s sub-sale.

It was submitted for Glencore that:

The ‘prima facie’ measure should not be used to give a buyer more than its “true loss”: Bence Graphics International Ltd v. Fasson UK Ltd[1988] QB 87 (CA); Kramer on the Law of Contract Damages (2nd edn) at 4.2.

BPOI’s reliance on Slater v. Hoyle & Smith Ltd[1920] 2 KB 11 (CA) was misplaced.

Glencore submitted that there were two critical points of distinction from Slater v Hoyle:

whether the defect was latent or patent; and

what was within the reasonable contemplation of the parties.

It was submitted for Glencore that in Slater, the defect was patent at the time of delivery, such that the claimant buyer had a choice as to whether to supply the oil under the sub-sale or instead acquire a substitute to deliver, but that the facts of this case are closer to Bence Graphics, in that the defect was latent and not discovered until after BPOI had already delivered to BPESE, such that BPOI never had any such choice to acquire a substitute (for supply to BPESE).

It was further submitted for Glencore that in the present case, like in Bence Graphics, the sub-sale was within the reasonable contemplation of the parties.

It was submitted for BPOI that the approach in Slater v. Hoyle applies and that its Sub-Sale to BPESE is legally irrelevant to its claim for damages. This is because the factual position in this case is analogous to that in Slater and distinguishable from the situation in Bence Graphics.

In Slater v. Hoyle Scrutton LJ held (at p.22-23) that subcontracts were left out of account in determining the loss for damaged goods:

In Bence Graphics the Court of Appeal took a different view on the relevance of the sub-sale. The majority view is set out in the judgments of Otton LJ and Auld LJ. However the reasoning for reaching a contrary view was different in the two judgments.

Otton LJ distinguished Slater on the basis that in Slater (i) the seller in that case did not know of the sub-sale; and (ii) the same goods were sold, i.e. they had not been processed by the buyer:

Auld LJ stated that Slater should be “reconsidered” and the critical matter was the contemplation of the parties and whether the sub-sale was within the contemplation of the parties:

Auld LJ held that the knowledge of the specific sub-sale was not critical:

Contrary to Otton LJ, Auld LJ said that conversion of the goods was also not a critical distinction:

The decision in Bence has been strongly criticised by Treitel on the grounds that remoteness is relevant only to claims for consequential loss, not to the difference in value between the goods delivered and the goods as they should have been; the question is simply how to measure the buyer’s loss.

Benjamin states at [17-057] that:

BPOI take support from the first instance decision in OMV Petrom SA v Glencore International AG[2016] EWCA Civ 778 where the Court of Appeal stated that:

BPOI also refer to the dictum in Choil Trading SA v. Sahara Energy Resources Ltd[2010] EWHC 374 (Comm):

In my view, the authorities referred to above establish that:

The prima facie rule does not depend on the existence of an available market for the defective goods.

Section 53(3) lays down only a “prima facie” rule, from which the court may depart in appropriate circumstances.

The decision in Choil would suggest that the measure is not an exact application of section 53(3) where the value of the defective goods is not determined at the time of delivery under the contract although this is not spelt out in section 53(3).

However, whether this case is viewed as an application of the prima facie method or as the “quasi” measure, the real issue is whether it is appropriate to take into account the position on the buyer’s sub-sale.

The reasoning of Auld LJ in Bence suggests that (unlike the finding in Slater) the sub-sale should be taken into account where a sub-sale (but not necessarily the specific sub-sale) was within the contemplation of the parties. By contrast the reasoning of Otton LJ in Bence suggests that the distinction lies in whether (as in Bence):

Glencore submitted (opening skeleton paragraph 168.2) that the parties contemplated that the Cargo would be re-sold to Gelsenkirchen; alternatively, the parties contemplated that the Cargo would be re-sold to a BP refinery. Either way, the parties contemplated that the loss from any breach of the contractual quality requirements by Glencore would be suffered by the refinery. Glencore relied on evidence of the exchange between the traders which indicates that the oil was destined for a BP refinery.

The documentary evidence makes no reference to the particular refinery (Gelsenkirchen) or to the particular BP entity. Mr Wawrzyniuk’s evidence in his witness statement is that he understood the references in the exchanges with Ms Behtash to be to a refinery within the BP Group and that he understood from those references that the Cargo was intended for a refinery within the BP Group.

The relevant extracts from the traders’ discussions on 1 April 2019 were as follows:

Whilst I accept the evidence that Mr Wawrzyniuk understood that the Cargo was intended for a refinery within the BP Group there was no mention of a sub-sale or its terms in the traders’ discussions.

As set out above there was no contractual requirement in the Sub-Sale contract for BPOI to supply that particular cargo of oil to BPESE (and I do not accept therefore the submissions for Glencore that the evidence as to the subsequent availability (or lack thereof) of alternative cargo at the time of delivery is relevant).

In cross examination it was put to Mr Haines that:

On this evidence, applying the approach in Choil (quoted above), the sub-sale measure is not appropriate in the present case since the parties did not contemplate that the particular goods supplied to the buyer will be used by the buyer for the purposes of satisfying a particular sub-contract nor were the goods purchased for the purpose of being used to make a particular product.

Further even if the parties “expected” that the oil would be resold to a BP refinery, it does not follow that the parties contemplated at the time of entering into the contract that the loss from any breach of the contractual quality requirements by Glencore would be suffered by the refinery.

Following the reasoning of Auld LJ, in my view, this was not analogous to a case where the parties “would have contemplated that, in the event of a breach by the seller discovered only after the decals had been in use, the buyer might wish to pass on to it claims for damages from dissatisfied customers”. This was not a case of a latent defect as that term would normally be understood merely because the contamination was not apparent from the certificates of quality delivered with the shipping documents. Even if it were a “latent” defect in the sense that BPOI had already delivered the Cargo to BPESE before the elevated levels of organic chlorides were discovered, and thus it would have been impossible for BPOI to re-sell it rather than deliver it to BPESE under the subcontract, it cannot be said that the parties contemplated that the BP sub-buyer might wish to pass on a claim for damages to BPOI: I accept the submission for BPOI that it is within the contemplation of the parties that a sub-buyer given contaminated oil would refuse the Cargo and send it back, as in fact occurred.

If the approach of Otton LJ in Bence is adopted, this was not a case where there was any “conversion” of the product prior to delivery under the sub-contract and thus the approach in Slater should be followed and the sub-sale ignored.

It was submitted for Glencore that:

BPOI’s difference in value claim is, in reality, premised on its sub-sale to BPOESA and it would be unprincipled to ignore the rest of the sub-sale arrangements (paragraph 168.5 of its opening skeleton).

Ignoring the Sub-Sale with BPESE would risk giving BPOI a windfall and be inconsistent with the compensatory principle (paragraph 168 of its opening skeleton).

It is important to note that Glencore refer to different sub-sales in those submissions. In my view the question of whether the loss should be measured by reference to the loss on the Sub-Sale to BPESE is determined by the application of the principles set out in the authorities discussed above. The sub-sale to BPOESA is relevant evidence as to the value of the contaminated Cargo but in my view is not relevant to the measure of loss as even if the Sub-Sale to BPESE could be said to be within the contemplation of the parties, the subsequent sale to BPOESA once the contaminated oil had been bought back could not be said to have been contemplated.

For the reasons discussed above, I find that the appropriate measure of damages is not BPOI’s liability to BPESE or the cost of cure but is the difference between the market value of sound crude oil and the value of the contaminated crude oil at the date of delivery, but that to the extent that the value of the contaminated oil cannot be determined at the date of delivery such that its value is ascertained at a later date (by reference to the price at which BPOI repurchased the oil from BPESA and sold it to BPOESA), it is the “quasi” s53(3) measure recognised in Choil.

Given the uncertainty surrounding the ratio in Bence, I propose to deal briefly with the alternative measure of loss advanced for BPOI (paragraph 186 of its opening skeleton), which is that BPOI’s liability to BPESE under the sub-sale amounted to the s53(3) measure of loss. It was submitted that by delivering the contaminated cargo to BPESE, BPOI breached the terms of the sub-sale and incurred a liability to pay damages, quantified pursuant to s53(3) of the Act.

Glencore submitted that although BPESE might have had a claim against BPOI, the claim was not notified in accordance with the terms of the sub-sale and is time barred. Glencore thus submitted (paragraph 107 of its Closing Submissions) that given the lack of a valid claim by, or liability on the part of, BPOI to BPESE, BPOI has suffered no loss. (If and to the extent Glencore sought to make a broader submission that BPOI's liability to BPESE did not amount to a loss, this submission is answered by the decision in Total Liban SA v Vitol Energy SA[2001] QB 643 at 651-653, where the court held that the existence of a liability even without prior payment may constitute an actionable head of damages).

I understand it to be common ground that the Sub-Sale incorporated the BP GT&Cs which provided in section 59.2.1 and 67, respectively, a time limit for complaints about quality and for legal proceedings to be brought.

Section 59.2.1 provided (so far as material):

Section 67 provided (so far as material):

BPOI submitted that:

BPESE complied with the requirement to notify complaints as to quality when it gave notice on 23 April 2019 by an email from Mr Rohmann, read with the test results which were sent.

The time bar was waived by an amendment to the sub sale agreement dated 25 February 2021 (the "Amendment Agreement").

The assertion of a time bar would be irrational, commercially absurd and harmful to its reputation: Finlay v Kwik Hoo Tong James Finlay & Co Ltd v. NV Kwik Hoo Tong HM[1929] 1 KB 400 (CA) (paragraphs 230-231 of its Opening Submissions).

Glencore submitted that:

The notice (purportedly) given by Mr Rohmann did not give notice of a claim and was not "accompanied by evidence".

On 22 April 2020, the time bar expired and liability was extinguished. The operation of the time bar is automatic and does not depend on BPOI's discretion: The Aries[1977] 1 WLR 185.

The Amendment Agreement entered into in February 2021 to delete the time bar was too late and assuming liability would amount to a voluntary act.

It would not be unreasonable for BPOI to rely on the time bar defence.

The email from Mr Rohmann on 23 April 2019 (at 14.22) to (amongst others) Mr Haines read (so far as material):

In my view, whilst it was not written as a "formal complaint", by the email BPOI were left in no doubt that BPESE were complaining about the quality of the Cargo and rejecting it due to the contamination. Contrary to the submissions for Glencore, there was no requirement for it to be a "notice of claim" or for it to set out any legal basis for the claim. I find on the evidence that BPOI did give notice of a "complaint" in relation to quality for the purposes of Section 59.2.1.

The issue of whether the complaint was "accompanied by evidence" as required by Section 59.2.1 has to be considered in the light of the exchanges that took place on the same day and a few days later. Earlier that same day (23 April 2019) Mr Haines had sent an email to various people including Mr Rohmann referring to the measurement of 15 PPM organic chlorides in the Cargo:

As part of that email exchange Mr Rohmann had responded clarifying that the 15 ppm was on the whole crude and that he would "share" the NWO reports once he had them available. In a separate email that day copied to various people including Mr Haines, Mr Rohmann set out the preliminary results from the in-line sampler during discharge showing levels above 15 ppm in the entire oil. (Glencore make reference in its Closing Submissions to the fact that one of the emails relied upon by BPOI is in German. In my view nothing turns on this in light of Mr Haines’ evidence in cross examination (Day 2 p.94) that he would ask a colleague to translate if necessary (or use Google Translate).

There is no express requirement in section 59.2.1 for the evidence to be in the same email or attached to it and I see no basis on which such a requirement should be implied. I find that evidence was supplied to BPOI and the requirements of section 59.2.1 were satisfied in the circumstances.

As to the Amendment Agreement in 2021, the relevant provision of the BP GT&Cs (which applied to the Sub-Sale) stated:

BPOI relied on the evidence of Mr Sieder in his witness statement concerning his telephone call with Ms Spier on 9 January 2020:

The evidence of Ms Spier in her witness statement (paragraph 20) was that:

Neither witness was cross examined on their witness statements. However, Glencore submitted that the relevant question of whether an agreement was concluded, and, if so, on what terms, is an objective question of law for the court and the witness' subjective opinion that something was agreed is irrelevant (Day 7 p138).

The relevant exchange recorded in the transcript is as follows:

It was submitted for Glencore that the transcript of the phone call viewed objectively does not equal an agreement. It was a "heads-up" that there should be in the future some possible agreement. (Day 7 138:1-138:6)

However in my view the evidence is clear that an agreement had been reached within the meaning of Section 74.5 in January 2020. The terms of the agreement are clear- there is to be a waiver of the time bar. There is no suggestion that further discussion or negotiation of the terms of the waiver are required on either side – there is merely a need for the formality of a written record:

Mr Sieder did not contradict Ms Spier on the call when she said this, nor did he indicate that further terms needed to be agreed. His evidence in his witness statement that the conclusion of the proposed agreement was "a formality" was unchallenged.

It was submitted for Glencore that:

an oral agreement is unenforceable as section 74.5 amounted to a "no oral modification" clause: Kabab-Ji v Kout Food[2021] UKSC 48; and

the evidence in writing must be "reasonably contemporaneous".

I accept the submission for BPOI that the clause in this agreement can be distinguished from the type of clause considered in Rock Advertising Ltd v MWB Business Exchange Centres Ltd[2019] AC 119 (SC) and Kabab-Ji. In Rock Advertising the relevant clause provided that:

In Kabab-Ji Lord Hamblen and Lord Leggatt in their judgment described the "no oral modification clauses" as "a number of provisions which prescribe that [the contract] may not be amended save in writing signed on behalf of the parties".

Whilst it is clear on the evidence that the parties contemplated that the agreement would need to be recorded in writing, there is no evidence which would tend to contradict the natural meaning of the words that, as a matter of construction, Section 74.5 allows for amendments to be agreed orally. If the evidence in writing is an implied condition precedent to the oral agreement, then that condition is satisfied by the Amendment Agreement.

Glencore submitted that "the authorities show and it would follow as a matter of first principles" that it is too late to evidence the oral agreement in writing after the commencement of proceedings "which concern that agreement".

Both parties sought to draw an analogy with the requirement in relation to guarantees and the Statute of Frauds that the memorandum has to be in existence prior to the commencement of the action in which the creditor seeks to enforce the guarantee: Andrews and Millett on the Law of Guarantees at [3-021].

Even if such an analogy with guarantees is apposite (as to which I have doubts given that guarantees are regarded as a "special class of contract"- see the rationale in Andrews and Millett at [3-002]) and a memorandum must be in existence prior to the commencement of the action in which the creditor seeks to enforce the contract, I do not accept that the commencement of the action by BPOI against Glencore amounts to an action to enforce liability under the sub-contract.

I further note that Andrews and Millett are of the view (at [3-021]) that, for the purposes of section 4 of the Statute of Frauds:

No authority has therefore been provided which establishes Glencore's submission that the evidence in writing under Section 74.5 must be "reasonably contemporaneous".

In my view there is no requirement that pursuant to Section 74.5 the evidence in writing has to be effected "within a reasonable period" and the Amendment Agreement was not "too late" to be effective to prevent the operation of the time bar.

For the reasons set out above, I find that, if I were wrong on the primary measure of loss:

the alternative measure of loss is that BPOI’s liability to BPESE under the Sub-Sale amounted to the s53(3) measure of loss; and

liability to BPESE was not time barred.

Given that this was the alternative measure advanced and my findings above, it is not necessary to consider the submissions advanced by BPOI relying on the principles in James Finlay (and The Lily Prima [1976] 2 Lloyds Rep 487).

It was common ground between the quantum experts and accepted for Glencore that the sound value of the Cargo (adjusted for delivery at Wilhelmshaven) is Dated Brent plus $0.35. (Joint memorandum and "Glencore's Revised Calculations on Value")

However, the contaminated value is in issue (Issue 5.4).

It was submitted for BPOI (paragraph 112 of its Closing Note) that:

the sale to BPOESA at Dated Brent -$8/bbl is the best evidence of value unless impugned as an unreasonable failure to mitigate; and

this was accepted by Ms Bossley in cross examination.

It was submitted in summary for Glencore that:

value is a question of objective fact; BPOI's submission that, unless the Castellon sale is shown to be unreasonable it sets conclusively the value, is inconsistent with value being an objective question of fact;

the offer to Glencore is not a freestanding data point at all, alternatively should be given very limited weight;

its primary position is that the Cargo is worth minus $3 per barrel against Dated Brent based on the remedial cost;

alternatively the Tupras offer sets the value;

alternatively that the Cargo was worth minus $5 per barrel against Dated Brent because that is about the mid-point in the range between the offer and the bid prices with MOH; and

BPOI's “minus 8 arrangement” cannot be viewed as a reliable or independent data point. It was not arm's length; it was not willing buyer and willing seller: it was instead willing buyer and disengaged seller, because nobody recognised the conflict of interest, so nobody acted for Gelsenkirchen. The optionality cannot be marginalised but has an obvious value, and there is no evidence that MOH would have expected optionality in the way that happens intra-group.

As to the approach to be taken to determine the value of the contaminated Cargo, Glencore referred the Court to Benjamin at [17-052] and the cross-reference (in the footnote) to Deutsche Bank AG v Total Global Steel Ltd[2012] EWHC 1201 (Comm) at [167].

Relying on these authorities, it was submitted for Glencore that value is determined by reference to all of the relevant evidence and not simply the price in the available market; and where there is no available market, the Court must take into account all relevant evidence bearing on value (paragraph 98.2 of Glencore's Closing Submissions).

[17-052] of Benjamin states (so far as material):

The relevant quotation from Total Global Steel (as set out in the footnote) was that:

It is not clear to me that BPOI disagreed with these propositions as set out in Benjamin and Total Global Steel but as I understand its submissions, it advanced the proposition that the sale to BP Castellon should be treated as the "best evidence" of the value of the contaminated oil.

I proceed on the basis that there was no market "in the ordinary sense" but there was evidence as to the market for the Cargo and the Court should consider all evidence which in its view has a material bearing on value in order to determine the value of the contaminated Cargo, and in so doing will form a conclusion as to whether in fact the sale to BP Castellon should be regarded as the best evidence of the value of the Cargo.

Before setting out the factual evidence as to the offers/tenders made at the relevant time which are primarily relied upon by the parties, it is helpful to set out the evidence of Ms Bossley in cross examination as to how to approach the various "data points" proposed by the parties:

It is also relevant to note that (in addition to the offers/tender discussed below) there was evidence before the Court of other exchanges in the period April-June 2019 between BPOI and other participants in the market (both directly and through other BP entities) of which I summarise the relevant exchanges below. Although I take them into account as part of the evidence as to the market for the contaminated oil, I do not set them out in detail as although in some of those exchanges prices were mentioned, they were in my view too vague to provide any significant assistance in determining the value of the Cargo, although they do provide useful background.

On 1 May 2019 Mr Hague contacted Unipec, the trading arm of Sinopec, to gauge any interest and the response was noncommittal:

On 2 May 2019 Mr Hague contacted PCK, a German refinery and on 7 May 2019 PKN a Polish refinery. Neither of these were interested.

Holt Global, a Swiss trading company was equally noncommittal when contacted by Mr Hague on 8 May 2019 but on 10 May 2019 came back with "a definite no" and the observation:

Neste, a Finnish refining company responded to Mr Hague on 8 May 2019:

Follow-up emails/chats from Mr Hague on 20, 21 and 22 May 2019 to Neste still resulted in a noncommittal response even when Mr Hague suggested that the oil "would come with an appropriate discount".

In discussions between Mr Hague and one of the BP traders in the US on 28 May 2019 there is a statement that "Valero is interested but not in a hurry" and then the US trader told Mr Hague on 29 May 2019 that Valero "said they would "need double digit discount" to take the risk on Urals". A further exchange on 4 June 2019 referred to Valero "looking for something in the -10 range". It is unclear whether these exchanges referred to another cargo which was more heavily contaminated but since it did not lead to any firm bid/offer I accord it no weight other than as general market background.

Taking what I regard to be the material offers/tenders in chronological order, they were as follows:

On 30 April 2019 Mr Hague contacted API, a Sicilian refinery and offered the oil at a price which equated to Dated Brent minus $0.20/0.40. API did not accept the "offer" and responded with a noncommittal

The "offer" or "indication" was not accepted by API. As Ms Bossley said:

Further although the offer was considered at the time to be a reasonable price by BPOI (according to the evidence of Mr Earl) I accept the evidence of Dr Imsirovic that this was at a very early stage when the market was "in a bit of a shock" and "didn't know what the values were":

This evidence is consistent with the evidence of Mr Hague:

The initial contact was likely to have been a phone call on 7 May 2019 according to Mr Hague and this was followed by an email on 8 May 2019 between Mr Hague and MOH and gave an "indication" of Minus $0.60. It was followed by a WhatsApp chat on 14 May 2019 in which MOH told BPOI that:

On 21 May 2019 Mr Hague emailed MOH:

In a WhatsApp exchange on 23 May 2019 when Mr Hague asked whether the MOH trader had "anything back" on the contaminated crude, MOH responded:

On 28 May 2019 BPOI responded to a tender from Tupras, a Turkish refinery, with an offer at Dated Brent minus $4 which was rejected by Tupras as "not competitive".

There are emails before the court of the discussions that were taking place between BPOI and BPOESA at the end of May 2019 concerning the possible solution of processing all or part of the Cargo at the Castellon refinery.

On 14 May 2019 Mr Williams wrote:

Mr Earl's evidence in cross examination was that at this point they did not know whether Castellon could process the oil. The relevant exchange was as follows:

On 29 May 2019 BPOI (Mr Williams) wrote to Mr Earl and other individuals at BPOI and BPOESA:

The email then set out 2 options: to take half the Cargo and to take the whole Cargo. The first option stated:

The second option stated:

It appears from the evidence of the contemporaneous emails that by 10 June 2019 the "technical cover" was in place and BP then needed to agree "the commercial boundaries" as to the identity of the cargo (the Alexia), the processing rate, and the timetable for delivery of the tranches of oil.

The relevant email from Ms Giner to Mr Earl and to Mr Williams read (so far as material):

On 20 June 2019 BPOI entered into a contract with BPOESA to sell 400,000 barrels of the Cargo (BPOI having agreed to repurchase that quantity of the Cargo from BPESE by a contract of the same date). Thereafter the contracts were amended to increase the quantity of oil such that the entire Cargo was resold to BPOESA in tranches at Dated Brent -$8.

On 14 June 2019 BPOI sent an email to Glencore inviting Glencore to purchase the Cargo at a price higher than the Dated Brent minus $8. The relevant passages read:

Glencore responded by email of 17 June 2019 in which it denied that it was in breach of the quality provisions of the contract and in relation to the invitation to purchase the Cargo responded as follows:

Dr Imsirovic's evidence in the Joint Memorandum in response to the question whether the price at which the Cargo was sold to BP Castellon was reasonable was that it was "the best bid BPOI had in the market".

His evidence was that:

Ms Bossley's evidence in the Joint Memorandum was that:

In her report (paragraph 79) she said:

Ms Bossley was cross examined on the issue of the significance of the price at which the oil was sold to BP Castellon to which she responded:

The full exchange on this issue was as follows:

Ms Bossley was giving evidence as an expert to assist the court on resolving the issues of quantum. In my view her reluctance to give a view on whether the price paid by BPOESA was "fair and reasonable" was therefore surprising and of little, if any, assistance to the Court in determining the weight to be given to that price as evidence of the value of the Cargo.

Glencore's primary position is that the Cargo should be valued based on the "remedial cost". In my view this seemed in effect to be an attempt to get the "cost of cure" which the Court has already rejected above as the appropriate measure of damages.

Glencore submitted that:

the Court should take into account all "available evidence bearing on arriving at an objective value" (paragraph 124 of its Closing Submissions);

the value should be the value "as it should have been agreed with Castellon" (paragraph 125 of its Closing Submissions); and

this in turn is a "proxy" for the value of the Cargo to any potential refinery buyer.

I reject this position for the following reasons:

If there is no market "in the ordinary sense" the court takes into account all relevant evidence to compute what the claimant has lost (see Benjamin above). However here there is evidence of "the price at which the buyer has been able to resell the goods to a sub-buyer who has knowledge of their defective condition" and the Court may take that into account.

Where there is such evidence, there is no authority cited to the Court that the price is not the actual price at which the goods have been resold but instead is an objective price which "should have been agreed" and thus has to be capable of being objectively tested or verified; the price agreed between the parties is their subjective analysis of value and as Ms Bossley stated in her evidence: "the only people who know the right terms of a deal are the two parties to that deal".

The court may have regard to the remedial cost but the evidence of Ms Bossley in cross examination was that:

Glencore sought to take its argument in favour of an objective price yet further by submitting that the value of defective goods should be assessed by reference to some hypothetical level of acceptable profit on the part of the (ultimate) buyer as the “incentive reasonably required" or the price at which it "ought to have done the deal”.

There is no authority cited for the proposition thus advanced by Glencore; in my view the profit made by Castellon is an internal matter for its business and is irrelevant to the weight to be given to the evidence of the price agreed between the parties.

The value to Castellon is not a "proxy" for other buyers: the Cargo might have a different value to a buyer who was a trader proposing to sell it on; and it is not even a "proxy" for other potential refinery buyers as it is clear on the evidence that the willingness/technical ability of other refineries to take the contaminated Cargo affected their perception of value. It is clear on the evidence that refineries cannot be treated as interchangeable - for example Gelsenkirchen was unwilling/unable to process the contaminated Cargo.

Mr Earl's evidence in cross examination (referred to by Glencore in its Closing Submissions at paragraph 126) was that although other refineries would be expected to be doing "similar calculations" on the benefit to accrue, such calculations were only done once a refinery had concluded whether it had the technical ability to process the contaminated Cargo:

Further, in my view:

even if other refinery buyers were looking to buy and did the calculations, there is no evidence that the level of profits which are (actually) anticipated at Castellon would be the same for other refinery buyers; and

even if the "reasonable incentive" were adopted, there is no evidence that this would be the same for other refineries and it is inconceivable and uncommercial (and not evidenced) to suggest that the same level of actual or hypothetical profit would exist or be acceptable amongst all refineries.

Ms Bossley was clear:

In my view the value of the Cargo to Castellon is evidenced by the price which BPOI and BPOESA agreed to pay and it would be wholly wrong in principle (and without authority) to seek to treat as "evidence" bearing on value, a hypothetical value calculated by Glencore which "Castellon would have paid for the Cargo had BPOI …done a proper analysis of the price including by reference to Castellon's anticipated profits".

In agreeing a price, there is no obligation or limitation on BPOESA to earn only a "reasonable incentive" and there is no basis for the evidence of the actual price agreed and paid (based on its own calculations and assessment of the market) to be disregarded in favour of an abstract hypothetical "objective" alternative.

In the light of these conclusions, it is not necessary in my view to consider further the detailed submissions about the level of profits (and "value" to Castellon and the ESA business) referred to in Glencore's Annex to its Closing Submissions.

Glencore's first alternative is that the Tupras offer sets the value.

It was submitted for Glencore (paragraph 21.2 of its Annex to its Closing Submissions) that the Tupras tender is particularly important because it shows BPOI's "own assessment" of the value of the Cargo at the end of May 2019.

Mr Earl was asked in cross examination about the level of that bid. His evidence was as follows:

Mr Hague's evidence in relation to the level of the offer to Tupras was that having got the indication from MOH at minus $8, BPOI was testing the market to try and find out where the best bid might be:

The offer to Tupras was not directly comparable to a sale to BP Castellon given the credit risk on Tupras and the credit terms: as set out above, Mr Hague's evidence was that as a result the offer was "equivalent to a minus 5 offer". He also told the Court that:

Although Glencore submitted (paragraph 125.2 of its Closing Submissions) that when compared with the Castellon sale, any negative price adjustments are counterbalanced by the positives (e.g. demurrage savings) it seems to me that on the evidence, the price offered by BPOI to Tupras as its estimate of the value of the Cargo was in substance lower than the minus $4 given the location and the credit risk.

Mr Earl agreed in cross examination that the offer to Tupras did not seem unreasonable at the time:

Even if it was viewed by BPOI as a not unreasonable offer, the (limited) significance of the offer lies in the fact that it was rejected by Tupras. I accept the evidence of Ms Bossley that in effect the rejection of BPOI's offer just reflects a "difference of opinion" between the buyer and the seller and does not set the parameters for the value:

The second alternative advanced for Glencore is that the value lay in the mid-point between the offer and bid prices with MOH of minus $5 (paragraph 125.3 of its Closing Submissions).

MOH offered to buy the Cargo but the offer was only for part of the Cargo, and according to Mr Hague, would have incurred further costs given its location:

Unlike the terms agreed with BPOESA, MOH did not have an option to return the Cargo if it was impossible to refine. In cross examination, Mr Earl's evidence was that MOH could have been given such optionality, and as to additional cost, it was a buyers' market for the contaminated oil. His evidence (so far as material) was as follows:

Glencore submitted (paragraph 125.3 of its Closing Submissions) that given the bid/offer range and the "significant profits" which Castellon would have made in processing the Cargo it can be inferred that MOH ultimately would have agreed to pay Minus $5/bbl for the Cargo.

In my view the evidence does not support the inferences for which Glencore contends:

In my view the evidence of the exchanges does not support the submission for Glencore that the "mid-point" is the value of the Cargo-in the email of 14 May MOH stated:

Glencore then seek to construct an argument based on that reference to $5-6 as reflecting MOH's profit calculations when no offer was made at that level and there is no real evidence as to the return which MOH would have been prepared to accept. As stated above, refineries cannot be treated as interchangeable and in particular there is no evidence as to what level of profit MOH would have made or would have been looking to make; there is no evidence on which to infer that a "reasonable incentive" for Castellon would also have been either acceptable to or reasonable for MOH, and there is no basis for an inference that MOH would have been prepared to take the oil provided it earned what was objectively a "reasonable incentive" (assuming there was evidence to support this theoretical calculation).

MOH expressed no indication in the exchanges before the Court that it would be prepared to pay a higher amount and any submission in this regard is merely speculation: Glencore submitted (paragraphs 19.9-19.12 of the Annex to its Closing Submissions) that the offer from MOH could have been improved if MOH had been "pushed" and BPOI had "countered" MOH. This is pure speculation on the part of Glencore (and to the extent Glencore rely on Ms Bossley (paragraph 19.11) on the part of Ms Bossley) and is not supported by any actual evidence. The evidence of Mr Earl was as follows:

Further, in my view, having regard to the other indications within the market and the lack of other interest, the evidence does not support that MOH would have been prepared to pay a higher amount than its bid. In the exchange on 23 May 2019 when Mr Hague asked whether the MOH trader had "anything back" on the contaminated crude, MOH responded:

This "hesitant" offer does not suggest that the mid-price of the MOH bid and offer should be taken as representing the value of the Cargo nor does the evidence suggest that MOH could be expected to improve its offer from the offer of Minus $8. (Mr Hague was invited to speculate as to the meaning of the phrase "hesitant to write something". His response in cross examination speculating on what MOH may have meant was not in my view evidence to which the Court should or does give any weight.)

The starting point it seems to me is the principle as expressed by Ms Bossley in cross examination:

Glencore has not advanced any evidence as to why it refused to offer to buy the Cargo at a level above minus $8 although in submissions counsel for Glencore disputed the view expressed by Dr Imsirovic that one could infer Glencore's view of the market value from its lack of interest.

In my view the Court is entitled to infer that had the value of the Cargo been significantly higher than the price at which BPOI invited Glencore to purchase the Cargo (as Glencore now submit) it is to be inferred that Glencore as a commodity trader would have been interested in buying all or part of the Cargo and reselling it to another refinery. BPOI made it clear in its email to Glencore that it had concluded that one of its refineries could process the contaminated Cargo by blending and given the submissions for Glencore that the value to Castellon is a "proxy" for the value to any potential refinery one might have expected Glencore to have an incentive to purchase the Cargo at around that price and resell it to a refinery.

Accordingly it seems to me that Glencore's refusal to buy the Cargo is relevant evidence that the price of Minus $8/bbl reflected its value.

The starting point is the evidence of Ms Bossley:

Glencore submitted in summary that:

The sale was not arm's length; this was an "intra-group construct" to maximise value for the ESA business of BP (Annex 1 para A to its Closing Submissions). (The refineries at Castellon and Gelsenkirchen are both within BP's ESA business.)

It was not willing buyer and willing seller; it was willing buyer and disengaged seller, because nobody recognised the conflict of interest, so nobody acted for Gelsenkirchen.

The optionality cannot be marginalised but has an obvious value, and there is no evidence that MOH would have expected optionality in the way that happens intra-group.

In my view on the evidence of Mr Hague (referred to above), the optionality on the part of BP Castellon does not impact in any significant respect the value to be attributed to the Cargo.

The mere fact that the sale was between two BP companies this does not establish that this was not an arm’s length transaction. The highest that Glencore can put its case is that Gelsenkirchen was "disengaged" and its interests not properly represented. This does not establish that BPOI and BPOESA did not negotiate an arm’s length transaction.

I reject the submission for Glencore (paragraph 7A of Annex 1) that BPOI is to be regarded as acting "on behalf of" Gelsenkirchen, if by this it is intended to imply that BPOI was acting as agent of Gelsenkirchen in a legal sense and thus the issue of whether the sale was arm's length should be assessed as between Gelsenkirchen and BPOESA such that BPESE needed to be separately represented in the negotiations. Whilst I accept that BPOI could be said to have been "interposed as an intermediary" (the evidence of Mr Earl), BPOI was acting as principal not as an agent in entering into the sale contract with BPOESA.

As the seller, BPOI was on the evidence exploring and considering other options for the Cargo – as reflected in the exchanges referred to above – and reached a conclusion on the best deal for it. Mr Hague rejected the proposition that BPOI was merely creating a paper trail in its exchanges with MOH and I have accepted his evidence as discussed above.

It was submitted for Glencore that the price at which BPOI sold the Cargo to BPOESA adds no additional weight to the MOH bid "in circumstances where BPOI witnesses are clear that the sole basis for the price was the MOH indicative bid".

I do not accept this submission which relied on the evidence of Mr Earl. In cross examination Mr Earl was being asked about specifically the email of 29 May 2019 and his response in relation to that email was as follows:

In my view the evidence shows that detailed work was done to establish the economics for BPOESA of taking the Cargo (as well as the technical feasibility) and I do not accept therefore the submission from Glencore that the price ultimately arrived at was solely based on the MOH bid such that the sale price adds "no additional weight to the MOH bid".

I also reject Glencore's interpretation of the evidence that BPOI was responsible for coordination of the purchase of oil for use in refineries and the economic aspects for the oil to be processed by the refineries and as a result the sub-sale to BPOESA was not an arm's length sale. Although BPOI did act in a coordinating role, Mr Earl's evidence (relied on by Glencore in paragraph 1 of the Annex to its Closing Submissions) did not support a conclusion that as a result of BPOI's "lead", the sub-sale was not arm's length.

Mr Earl was asked in cross examination about the email of 10 June 2019 from Ms Giner to Mr Earl and Mr Williams (and others) and the evaluation of the economics of the proposed sale to BPOESA, and he made it clear that BP Castellon had to be satisfied that "this is worth doing and that includes the economics”.

The relevant exchange was as follows:

The unchallenged evidence of Mr Earl in his witness statement was that Ms Giner (together with Miguel Molto Roca, copied on many of the relevant emails) worked in production planning at the Castellon refinery, i.e. she was not representing BPOI but BPOESA.

The location of Mr Williams in London and the LP analyst is irrelevant to their roles and the issue of whether the sale to BPOESA was arm’s length: I note Mr Earl's evidence earlier in his cross examination that the role of Mr Williams for Castellon role was "to get the best possible deal on a particular crude for Castellon" (a point which appeared to be acknowledged by Glencore at paragraphs 2.2 and 3 of Annex 1 to its Closing Submissions).

The relevant exchange was as follows:

On the evidence the price agreed with BP Castellon reflected both the seller's (that is BPOI's) assessment of the market (which included the offer from MOH) but also the buyer's (that is BPOESA's) assessment of value which included an evaluation of the economics of processing the Cargo from the perspective of the refinery, BP Castellon.

It was a sale between two separate corporate entities. BPOI had a choice where to sell the Cargo. Glencore's submissions that the offer from MOH was somehow not a genuine reflection of the value because BPOI did not pursue MOH further, is in my view not made out on the evidence for the reasons set out above.

In so far as Glencore seek to place any weight on the fact that BPOI did not accept the bid from MOH at the end of May and only concluded the sale to BPOESA on 20 June, that has no relevance to the issue of value in the circumstances: firstly at the time of the bid from MOH, BPOI was exploring the alternatives with BPOESA; secondly there is no evidence to establish any particular change in the value for the contaminated Cargo during that period of a few weeks.

For the reasons discussed above, I reject the proposition that this was not an arm's length transaction or between willing seller and buyer.

Accordingly, I find that the sale price from BPOI to BPOESA was an independent data point and a "compelling piece of evidence".

It was submitted for Glencore that in relation to Tupras and MOH, BPOI was "seeking to have it both ways" in submitting that the Tupras offer did not equal market value because Tupras did not accept it, but that the MOH bid does equal market value even though BPOI did not accept it.

I do not accept this submission. The fact that an independent third party, Tupras, refused the price offered by BPOI of minus $4 is some evidence in that a buyer refused to purchase at that price, but does not provide evidence as to what the actual value is. It is of greater significance in my view that another third party, MOH, offered to buy at minus $8. It is irrelevant in my view to the question of value that BPOI did not accept the bid from MOH given that it was a bid that was open to BPOI to accept. There is nothing in the contemporaneous evidence which leads me to a conclusion that the price offered by MOH did not reflect a genuine view of the market and what MOH was prepared to pay BPOI. (As stated above, I reject the submission that this was artificial on the part of BPOI to create a paper trail). I also reject the submission that the MOH bid should be treated as an outlier - it was the only firm bid.

In reaching a conclusion on the value of the contaminated Cargo I have regard to the price at which the buyer has been able to resell the goods to a sub-buyer who has knowledge of their defective condition and have considered that price against the other evidence of value referred to above.

In my view for the reasons discussed above, I find that the value of the contaminated oil was Dated Brent minus $8/bbl.

The starting point is that Glencore has to establish that BPOI has "unreasonably" failed to mitigate its loss and damage.

It was submitted for BPOI that:

The experts agree that "dilution of high organic chloride content crude oil with a crude oil containing negligible concentrations of organic chlorides would be a reasonable practical solution to reduce the level of organic chloride to an acceptable concentration for refining": Joint Memorandum paragraph 19.

This was, in fact, the approach taken by BPOESA at the Castellon refinery. The process was technically complex, required considerable planning, and resulted in three tranches of oil being delivered to Castellon between June and August 2019. The oil was processed at a low rate of around 6,000 barrels a day (for the first two tranches) or around 8,000 barrels a day (for the third tranche).

This blending operation could not be carried out by BPESE at the Gelsenkirchen refinery. Among other reasons: (i) the risks to the equipment at that refinery were considered to be too high: 1 Haines paragraphs 34-40; and (ii) there was inadequate tank space at the NWO facility to store and blend the oil over a considerable period of time: 1 Haines paragraphs 41-43. BPOI, as an oil trading company with no refinery of its own, could not conduct the blending or processing itself.

It is submitted for BPOI (paragraph 223 of its opening skeleton) that the most that could possibly be said is that BPOI had more than one reasonable response open to it but that does not constitute a failure to mitigate: Thai Airways International Public Co Ltd v KI Holdings Co Ltd[2015] EWHC 1250 (Comm) at [38]:

It was submitted for Glencore that it was unreasonable of BPOI not to pursue MOH in tandem with Castellon when each was interested in approximately half the Cargo. Had they done so, they could have cleared the vessel by about one month earlier and saved $1.1 million.

The evidence of Ms Bossley in cross examination was as follows:

Ms Bossley also accepted that the freight would have been higher to MOH as it was based in Greece so was an extra one or two days’ sailing:

Mr Hague's evidence as to the value of the offer from MOH was as follows:

In my view Glencore has failed to show that BPOI acted unreasonably in relation to its duty to mitigate. The offer at minus 8 from MOH was for less than half the Cargo and had an additional cost in terms of transportation. Even if BPOI had pursued the offer from MOH, Glencore have not established that it is likely that an improved offer would have been forthcoming for the reasons discussed above.

Ms Bossley, the expert called by Glencore, was not apparently prepared to give evidence that the sale was unreasonable (or reasonable).

In any event as noted above, there is no failure to mitigate where there is more than one reasonable response open to the wronged party. Even if the MOH offer is regarded as comparable, this can only be said to be an alternative and not the only reasonable response in the circumstances.

There are two preliminary issues to address:

Glencore submitted (paragraph 101 of its Closing Submissions) that if BPOI succeeds on its primary case under s.53(3), it must necessarily be precluded from claiming any of its other heads of loss because those other heads of loss all arise out of BPOI’s decision to keep the Cargo, rather than to sell it on the date of delivery as assumed by s.53(3). It was submitted that BPOI cannot properly claim, on the one hand, a head of loss premised on the immediate sale of the Cargo in mitigation of its loss, and on the other hand, further heads of loss arising out of the expense of keeping the Cargo.

Glencore submitted in relation to the other heads of loss that the loss was not suffered by BPOI but by BPESE.

As to the first issue, in my view BPOI is entitled to recover the difference in value between the sound and the defective goods pursuant to s.53(3) but I have been taken to no authority to support the proposition that additional losses incurred by the buyer cannot be claimed (subject to causation and remoteness).

As to the second issue given my findings above in the alternative on the measure of loss and the finding that the liability to BPESE was not time barred, it follows that it is not necessary to determine whether the loss was that of BPOI or BPESE in order for the loss to be recoverable.

BPOI claims US$3,682,713 in respect of storage and transportation costs of the contaminated oil between the date it was discharged at Wilhelmshaven and the date it was discharged at Castellon.

The claim is quantified by Mr Earl at Appendix 1 to his first statement subject to a reduction of US$101,790 to account for the reduced freight rate on "NORDIC BREEZE" accepted by Mr Earl in cross-examination.

The costs are principally freight and demurrage for the vessels Navion Anglia and Nordic Breeze but also include STS transfer costs and other charges associated with moving the Cargo.

BPOI has claimed these costs on two alternative bases:

BPOI claims these losses as a separate head of loss, or reasonable cost of mitigation, in addition to the 'Dated Brent -$8.35' assessment of the difference in value: APOC §22(b).

Alternatively, BPOI claims these losses as a constituent part of the 'difference in value' calculation; being necessary costs that were incurred on top of, and in addition to, the 'Dated Brent -$8.35' price differential that would not have been incurred on a sound cargo: Reply §36.8

It was submitted for Glencore (paragraph 129 of its Closing Submissions) that it is for BPOI to prove the quantum of its claim against Glencore, by reference to the quantum of (i) the shipping costs incurred; and (ii) BPOI's liability to BPESE, but that there are a number of “shortcomings” with the evidence being led (or not led) by BPOI.

These “shortcomings” were originally set out in Glencore's opening skeleton, but since then certain arguments (in respect of blending and the calculation of freight for Nordic Breeze) are no longer pursued by Glencore in light of the evidence, or have been resolved by agreement.

The outstanding issues regarding these costs therefore seem to be:

firstly, the claim for bunker costs which Glencore says has not been proved: it submitted that under the relevant charterparty the charterer is not liable for these costs in the circumstances and Mr Earl had not seen the calculations; and

secondly, whether the oil loaded on board the Navion Anglia was connected to the Cargo discharged from the Alexia.

Glencore in its oral closing submitted that

Mr Earl's evidence in cross examination was as follows:

Prior to trial Glencore had seen the relevant charterparty and BPOI has provided a copy of the relevant invoice (both documents were referred to in Glencore's opening skeleton at paragraph 204). In my view these bunker charges have been proved on the evidence and there is nothing unfair in the way in which the evidence was presented or emerged.

As to the second issue, whether the oil loaded on board the Navion Anglia was connected to the Cargo discharged from the Alexia, the experts agreed that further documentation was required.

In his second report Mr Minton stated:

However, BPOI rely on Mr Jones' second report (paragraph 205 of its Closing Note) in which he stated:

In the light of this evidence from Mr Jones, it seems to me that sufficient explanation has been provided to establish the connection between the oil loaded on board the Navion Anglia and the Cargo discharged from the Alexia and I find that BPOI is entitled to recover the full costs of the Navion Anglia and Nordic Breeze.

As to storage, Ms Bossley's evidence is that other storage options might have been pursued. However, in the circumstances I find that storage on board a vessel was reasonable.

As to transportation I accept the evidence of Dr Imsirovic that BPOI acted reasonably in lifting the Cargo on the Navion Anglia and then transferring it to the Nordic Breeze and interposing a voyage to load a cargo between discharge of the second and third tranche.

BPOI claims US$157,745 for working capital losses.

In his witness statement Mr Earl explained this head of loss as follows:

In his witness statement the amount claimed was stated to be $456,576.

However at the start of his oral evidence Mr Earl amended this claim to the lesser amount of some $157,000. No explanation was provided as to the reason for the error; at the start of his oral evidence, Mr Earl merely corrected the amount claimed in his witness statement under this head:

In cross examination Mr Earl was asked:

I accept the submission for Glencore that this loss has not been sufficiently proved: no proper explanation has been provided for the considerable reduction in the head of loss which itself casts significant doubt on the validity of Mr Earl's calculation in this regard. Further I also accept the submission for Glencore that it seems likely that it is duplicative (at least in part) of the claim for interest.

In the particulars of claim the hedging losses are said to be costs incurred hedging the Claimant's exposure to Brent crude prices between the date of delivery of the contaminated Cargo and its final disposal, of US$ 357,474.

It was submitted for BPOI that:

The claim is BPOI's loss which reflects the fall in value of the physical Cargo caused by delayed disposal and fall in Dated Brent over that period (paragraph 215 of Closing Note).

The Court should accept the evidence of Dr Imsirovic at paragraph 14 of his second report that:

The loss is calculated with allowance for a credit for hedging gains attributable to mitigation (paragraph 215 of BPOI's Closing Note).

I accept the evidence of Ms Bossley in cross examination that:

If the contamination caused a BP company to in effect be long in physical cargo over the period May through June, July and later, that exposed that party to a price risk on Dated Brent.

In this case Dated Brent fell between the date the Cargo would normally have cleared the refinery and the date it was sold.

That would cause a real dollar loss to the party holding the Cargo unless they had hedged it.

However whilst the loss claimed is intended to “reflect” the underlying fall in value in Dated Brent, the issue is whether BPOI have proved that they suffered a loss given that the loss is not the fall in value of the physical cargo by reference to the fall in the benchmark but has to take into account the fact that BPOI was already hedged against the fall in value up to the end date of the existing hedges and thus the loss (if any) was the loss arising out of additional hedges (i) put on once BPOI decided it was exposed to a potential loss by reason of the delayed delivery; and (ii) rolled forward as BPOI decided to extend the hedges by reason of the delayed delivery. Those additional hedges may have resulted in a loss or gain.

The evidence of Ms Bossley was as follows:

Mr Earl has put forward his calculation of the loss but in my view, there are three principal difficulties with accepting his calculation:

there is no evidence to support his method of calculation as to when the additional hedges were put on or rolled or for what period;

it is unclear why in his calculations Mr Earl has taken the particular starting dates; and

Mr Earl has done his calculation retrospectively, which does not accord with the rolling forward which would actually have taken place.

The evidence of Mr Earl was that the management of risk, i.e. hedging, was done centrally:

The evidence of Ms Bossley was that someone would have had to inform the hedging team of when physical risks were opened and either deferred or closed.

In her first report Ms Bossley said:

In her second report Ms Bossley stated:

Mr Earl's evidence in cross examination was:

Whilst I accept the evidence that the hedging was done centrally by BPOI and not by reference to individual exposure, and that usually the system could be updated to take account of the bills of lading dates, it seems to me that once there was an issue with the contaminated Cargo, it is unlikely to have been wholly automatic and that seems to accord with the evidence of Mr Earl and of Ms Bossley. However, there is no evidence of this nature before the Court to verify the approach of Mr Earl.

Although the absence of this evidence may not have been fatal to establishing the loss (it appeared to be accepted for Glencore in oral closing that there is authority which allows the Court to take account of hypothetical evidence where the Court is satisfied that a loss has been suffered, but it is difficult to quantify), there is a further difficulty in that Mr Earl assumed that the hedges were opened on 17-25 April – that is, before BPOI were aware of the issue with the contaminated Cargo.

In her first report Ms Bossley said:

In her second report, Ms Bossley said:

Mr Earl in cross examination sought to explain the starting date for his calculations on the basis that BP hedged for the period for the oil to pass through the refinery.

This does not appear to accord with the opinion of Dr Imsirovic (paragraph 14 of his second report referred to above) which BPOI invited the Court to accept: “the difference in value of physical oil relative to futures contracts, at the time of purchase and the time of sale”.

Further, the explanation now provided by Mr Earl does not explain how that existing hedge which he says was unwound as the crude was processed accords with the new (theoretical) hedge (the costs of which are now claimed) which was calculated by reference to when the three parcels of oil were delivered to Castellon (not when it was processed).

This explanation was challenged by Ms Bossley in her oral evidence:

BPOI in its Closing Submissions (paragraph 234) criticised Ms Bossley on this point and submitted that Mr Earl referred to hedges of the Dated Brent benchmark. However, the criticism does not address the point that Mr Earl said in oral evidence that the original hedges were priced according to refinery throughput, but his calculations for the loss were on delivery of the three tranches to Castellon.

The evidence of Ms Bossley was that the hedges would have been rolled and the precise dates on which the hedges were rolled would affect the costs of rolling the positions.

In her first report her evidence was as follows (so far as material):

However, Mr Earl has taken dates and periods with the benefit of hindsight rather than reflecting what actually occurred. Mr Earl’s evidence was:

Ms Bossley also criticised Mr Earl for using Platts Brent rather than the ICE Futures price. Her evidence was as follows:

I accept there was a delayed disposal of the Cargo and a fall in Dated Brent over the period.

In my view:

BP was hedged against a movement in the Dated Brent market but once the dates for delivery of the Cargo changed the hedges no longer provided protection so BP was exposed to a risk of loss.

BP therefore took action to mitigate such loss by putting on new hedges and Ms Bossley accepted that this was what she would have expected:

On the evidence that was a reasonable step to take and BP is entitled to the costs of mitigation.

The defendant is entitled to the benefit accruing from the claimant's action and is liable only for the loss as lessened.

The real issue here is therefore what is the amount of the loss as adjusted for the costs of mitigation.

Glencore submitted that the loss is entirely theoretical and BPOI has failed to prove its loss (paragraph 141 of its Closing Submissions). Glencore submitted orally in closing that BPOI must prove the mitigation expenses, rather than that there were mitigation gains, and in that context Mr Earl's calculations were fundamentally flawed.

I note that Dr Imsirovic said (paragraph 16 of his second report) that:

Dr Imsirovic does not however address the detailed points raised above and I prefer the evidence of Ms Bossley which was detailed and reasoned.

If and to the extent that BPOI say that its loss is the fall in the benchmark and that this is reflected by the (net) hedging gains and losses, I find that BPOI have not established that the theoretical calculation of Mr Earl is in fact a proper reflection or estimate of the losses suffered by BPOI for the reasons set out above.

In the alternative, if and so far as these losses are said to result from action taken to mitigate its losses, and thus the legal burden of establishing a failure to mitigate lies with Glencore, I accept that in principle it was reasonable for BPOI to mitigate its loss by putting on new hedges, however BPOI bears an evidential burden to establish the losses which it claims by reason of that mitigation. The amount claimed for hedging losses by way of mitigation are theoretical and they do not reflect the actual costs which can be said to have resulted from the mitigation actually taken by way of hedging.

For these reasons I find that the claim for hedging losses should be rejected.

BPOI originally claimed US$414,653 in respect of loss of cargo volume. BPOI submitted (paragraph 209 of its Closing Note) that this loss occurred during successive transfers of the Cargo from Wilhelmshaven to Navion Anglia from Navion Anglia to Nordic Breeze and from Nordic Breeze to Castellon storage tanks.

The bills of lading specified a net 719,573 barrels and the quantity discharged at Castellon was 713,876 barrels.

BPOI therefore claimed for 5,697 barrels at a price of Dated Brent plus 0.53.

Mr Earl agreed that the movement of oil from Ust-Luga to NWO in the first instance, had there been no organic chlorides losses, would have naturally incurred losses, and there was evidence by reference to an Intertek report of a loss of 2,470 barrels.

I understand BPOI to have agreed that the claim should be reduced accordingly (paragraph 148.3 of Glencore's Closing Submissions).

I accept that the loss now claimed was incurred directly as a result of Glencore's breach of contract as this loss would not have been incurred if the Cargo had been on specification and processed by Gelsenkirchen.

I find that BPOI is entitled to recover the adjusted figure of US$234,861.06.

This is a claim for US$303,180 as demurrage paid on other vessels delayed at Wilhelmshaven by the re-loading of REBCO onto the Nordic Breeze.

There are three vessels:

Vinland – carrying a cargo purchased to replace the contaminated Cargo and delayed;

Navion Oceania – diverted to cover the shortfall of crude and delayed until the contaminated crude was removed from the tanks; and

Delta Sailor – delayed awaiting tank space.

It was submitted for BPOI that:

these losses arose naturally from the breach of contract;

they are not "consequential losses" within the meaning of section 66.1 of the GT&Cs (which excludes liability for consequential losses); and

the Vinland and Navion Oceania were carrying replacement cargoes of crude oil for Gelsenkirchen (necessary as a result of the Cargo being contaminated), and all three were delayed by port congestion as the direct result of the breach of contract.

It was submitted for Glencore that:

there was insufficient documentation to establish causation, having regard to the proof the parties have agreed is required for a demurrage claim in respect of the very vessel carrying the cargo under the contract of sale (section 30.3 of the GT&Cs); Glencore has no insight into the movements of these three vessels, but none of the usual documents for a demurrage claim that would have been required to be presented to BPOI by the other shipowners have been given. Instead, BPOI relies upon one or two assertions in emails from individuals who have not been tendered to try and establish causation.

The loss is too remote.

The loss is excluded under section 66 of the GT&Cs.

Insofar as Glencore resists this claim on the basis that the liability is precluded by section 66.1 of the GT&Cs, Section 66.1 provides:

The court was referred to 2 Entertain Video Limited v Sony DADC Europe Limited [2020] EWHC 972 (TCC) at [218]-[238].

I note that in her judgment O'Farrell J stated that the starting point is that of construction of the relevant clause. She then reviewed the authorities on the issue of consequential loss, and I have regard to the principles set out in those authorities.

Starting with the construction of the clause in accordance with the principles referred to earlier in this judgment, in this case the losses now claimed do not appear under the list of expressly identified losses. One must therefore fall back on the general principles and ask whether the losses claimed are the natural result of the breaches complained of, or put another way, according to the usual course of things, from such breach of contract itself.

Insofar as Glencore submitted that the loss is too remote as not within the parties’ reasonable contemplation, I note that BPOI submit that these losses fall within the first limb of Hadley v Baxendale(1854) 9 Ex 341 and not the second:

I note the following in the judgment of O'Farrell J at [231]:

Having regard to the authorities, it seems to me that if the losses are a direct or natural consequence of the breach, it requires no "specially mutually known fact" for these losses not to be excluded as consequential loss under section 66 or general principles as to the remoteness of damages.

I reject the submission for Glencore that the evidence required to establish this head of loss is equivalent to that under section 30.3 of the GT&Cs which is of limited application as section 30.1 makes clear.

A contemporaneous internal BP document gave the following reason for the demurrage:

Mr Haines in an email dated 19 May 2019 referred to the shifting costs:

The court then has evidence of the invoices supporting the amounts actually claimed of demurrage of US$186,433 and shifting costs of US$55,084.

Although Mr Earl was challenged about the demurrage claims no question was put to Mr Haines in relation to his email above.

I do not accept the submission for Glencore that the loss is indirect or consequential or the relevance that the ships would have been discharging cargo at Wilhelmshaven in any event (paragraph 225 of its Closing Submissions): the loss was caused by the delay to the unloading as a result of the contaminated Cargo not the mere fact of having cargo to discharge.

I find that this loss has been proved in relation to the Vinland on the evidence before the Court and it is a loss which flows directly from the breach of contract as the vessel was delayed because the "off spec Urals was still in tank blocking ullage".

An invoice for the demurrage claimed of US$49,500 is before the court. The reason for the demurrage is evidence by the email from Mr Rohmann to Mr Haines on 20 May 2019:

Glencore relied on the evidence of Mr Earl in cross examination:

Mr Earl had no independent knowledge of the date at which the vessel actually arrived. He had already given evidence that he did not personally deal with the demurrage claims or investigate them. The document to which he was taken in cross examination dated 26 April 2019 was sent before the actual arrival and was stated to be an estimate. The court has the later email (when the actual arrival would have been known) and the invoice which confirms that demurrage was incurred. Mr Haines, who was the recipient of the email of 20 May 2019 (also from Mr Rohmann), was not cross-examined on this.

I find on the evidence that this loss has been proved in relation to the Navion Oceania on the evidence before the Court and it is a loss which flows directly from the breach of contract as the vessel was delayed as a direct result of the "off -spec Urals still [being] in tank".

An internal BP document dated 9 May 2019 recorded:

The court has before it the invoice for US$12,163.

I find that this loss has been proved in relation to the Delta Sailor on the evidence before the Court and it is a loss which flows directly from the breach of contract as the vessel was delayed because the "vessel had to wait until off -spec Urals has finished loading on vessel Navion Anglia to free up ullage".

For the reasons set out above, I find that:

There was a contract formed on 2 April 2019 by the exchanges of 1 and 2 April 2019 between Mr Wawrzyniuk and Ms Behtash on the terms of the Recap including the GT&Cs.

The oil delivered was contaminated by organic chlorides in breach of the Recap quality clause and Section 59.1.1 of the GT&Cs.

I further find, for the reasons set out above, that BPOI is entitled to damages as follows:

The Cargo's diminution in value as a result of the organic chlorides contamination amounting to US$5,960,095 as the difference between the market value of sound crude oil of about "Dated Brent + $0.53" and the value of contaminated crude oil of "Dated Brent -$8.00".

US$3,682,713 in respect of storage and transportation costs of the contaminated oil between the date it was discharged at Wilhelmshaven and the date it was discharged at Castellon.

Cargo volume losses of US$234,861.06.

US$303,180 as demurrage paid on other vessels.