24/05/2021

BPOI successful in US$17m restitution claim in the Commercial Court

BP Oil International Ltd v Vega Petroleum Ltd and another [2021] EWHC 1364 (Comm)

Michael Ashcroft QC and Oliver Caplin acted for the successful claimant, BPOI, in this dispute which concerned the fate of 211,387 barrels of Gulf of Suez Mix crude oil (GOSM).

The judgment will be of interest those operating in the energy and oil trading space, and those who are interested in the interplay between restitution and contractual claims.

Background

 BPOI’s claim was, as the judgment recognises, a straightforward one. It had paid US$17,235,448 to the defendants – Dover and Vega – for the purchase of 211,837 barrels of GOSM over the course of approximately a two year period for delivery “FOB Ras Shukheir Terminal” (in Egypt). The defendants were, at various times alone or together, sat within a joint venture vehicle with the Egyptian General Petroleum Company (EGPC), with the JV acting as the operator of the Ras El Ush (REU) oil field in Egypt. Through their contract with BPOI they essentially sold their share of the production from the REU Field to BPOI.

It was common ground at the trial that the defendants had never delivered physical possession of the GOSM to BPOI FOB Ras Shukheir Terminal. Thus BPOI’s claim was for the return of the sums it had paid over for the GOSM – by which, BPOI said, the defendants had been unjustly enriched because there had been a failure of basis / total failure of consideration.

Judgment

The defendants raised an array of defences, all of which were dismissed by the judge, Mrs Justice Cockerill, in a detailed and careful judgment. Some are detailed here.

The first main defence run by the defendants, which the judge found to permeate many of its other defences too, was that the structure of the contracts was such that BPOI did not have a right to recover the sums it paid in restitution. It had paid those sums over to the defendants irrevocably. This argument was dismissed by the judge – the contracts, properly construed, did not exclude claims in restitution.

The defendants also argued that there had been no total failure of consideration because some GOSM had been delivered to BPOI under one of the contracts, and in any event, it had obtained a right to delivery of the GOSM, which was worth at least something. The judge rejected this argument. The contracts were divisible, and there had been a failure of basis in respect of the GOSM that had not been delivered. Further, a right to delivery, which could never be realised, was worthless and did not represent the consideration that was intended to pass, ie. actual FOB delivery.

Next, the defendants argued that BPOI had either not effectively terminated the contracts, or it had done so in repudiation of them. The judge found that BPOI had wrongly terminated the contracts, but that this, on the state of the law as it is today, did not bar a claim in restitution.

The defendants also alleged that BPOI was estopped by convention from contending the Defendants had not delivered the GOSM. This was rejected on the facts, and also because it would contravened a no oral variation clause in the contracts.

Finally the defendants argued that BPOI’s claims were time-barred pursuant to the standard time-bar contained in the applicable version of the BP General Terms that had formed part of the contract. This argument too was rejected – as a matter of the time bar’s proper construction, it could not fit the type of claim BPOI was bringing.

As such, with all the defences rejected, the judge allowed BPOI’s claim for the restitution of US$17,235,448 in full.

Michael Ashcroft QC and Oliver Caplin were instructed by HFW for the claimant.

Read the full judgment