25th Jul 2013
This judgment considers the law on the Sale of Goods Act implied terms of right to sell and quiet possession, and the law on force majeure.
Robert Bright QC and Jessica Sutherland acted for Trafigura in its successful appeal from the judgment of Teare J of 27 June 2012. The dispute related to a chain sale of crude oil from Nigeria. In breach of local regulations, Total, the operator of the Akpo oil terminal, commenced the loading of the vessel “CRUDESKY” without the presence of a representative of the Nigerian Department of Petroleum Resources (DPA), because it believed that the irregular loading had been verbally authorised by the DPA’s local office in Port Harcourt. In fact written authorisation, which was what was required, had not been given by the DPA’s Headquarters in Lagos. This led to the vessel being detained by the Nigerian authorities for a month and a half. The vessel was subsequently released upon payment by Total of a “fine” of US$12 million to the Nigerian Ministry of Oil. Trafigura who were the buyers at the top of the chain of sale contracts had chartered the vessel from her disponent owners, Great Elephant. Great Elephant claimed against Trafigura for demurrage and additional losses by reason of the vessel’s detention. Trafigura sought to pass these losses down the chain to its immediate seller, Vitol. Vitol in turn, sought to pass them to its seller, COOSI. In a judgment that considered the law on the Sale of Goods Act implied terms of right to sell and quiet possession, and the law on force majeure, Teare J held that the “fine” demanded by the Minister had been illegal and broke the chain of causation between breach on the part of Vitol and/or COOSI and the losses suffered by Trafigura. The Judge further held that in any event Trafigura could not pass its losses down the chain of sale contracts because the force majeure clause in the sale contracts applied; the delay to the vessel was beyond the reasonable control of Total who for the purposes of the sale contracts was the agent of each relevant contracting party. Trafigura appealed. Vitol likewise appealed against COOSI. The Court of Appeal (Longmore, Tomlinson, Underhill LJJJ) reversing the decision of Teare J, held that the delay had not been an unforeseeable force majeure event beyond the control of Total, or if relevant, any of the contracting parties themselves. Longmore LJ, who gave the leading judgment considered, by reference to the judgments in Channel Island Ferries Ltd v Sealink UK Ltd  1 Lloyd’s Rep 323 and Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery  2 All ER Comm 640, that the concept of being beyond a corporate person’s control, set a comparatively high hurdle. Having considered the judgments in The Kriti Rex and The Marine Star, the Court of Appeal also rejected an argument put forward on behalf of COOSI (relying on decision in The Marine Star), that the relevant person’s control for the purposes of the sale contracts was the seller itself and not a person to whom he had delegated his responsibility. Finally, having considered the test for when the actions of a third party can break the chain of causation between a breach of contract by a defendant and the loss suffered by a claimant, the Court of Appeal held that the actions of the Minister in imposing the “fine” had not “obliterated” or “wholly supplanted” the original breaches by Vitol and/or COOSI. COOSI has indicated that it will seek permission to appeal to the Supreme Court.
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