![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Commercial Court) Decisions |
||||||||||
|
THE FUTURE OF BAILII DEPENDS ON USERS LIKE YOU
If you want to be able to use BAILII in the future, please consider making a donation to celebrate BAILII's 25 years of providing free access to law.
Your donation, no matter the size, will help BAILII maintain the legal databases that you and many other users rely on. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
| ||||||||||
|
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Proton Energy Group SA v Lietuva [2013] EWHC 2872 (Comm) (24 September 2013) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2013/2872.html Cite as: [2013] EWHC 2872 (Comm), [2014] 1 Lloyd's Rep 100, 150 Con LR 72 |
||||||||||
[New search]
[Context
]
[View without highlighting]
[Printable RTF version]
[Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
PROTON ENERGY GROUP SA |
Claimant |
|
| - and - |
||
| ORLEN LIETUVA |
Defendant |
____________________
Christopher Harris and Ian Higgins (instructed by White & Case LLP) for the Defendant
Hearing dates: 8 to 11 July 2013
____________________
Crown Copyright ©
Judge Mackie QC :
Proton,
is a company incorporated in Switzerland engaged in the business of international trading of oil and gasoline related products. The Defendant, Orlen, is a petroleum refining company incorporated in Lithuania. This is a dispute about whether dealings between the parties gave rise to a contract, if it did what the terms were and, if it was broken, what if any damages should be paid.
"by an email sent on 14th June 2012,Proton
made what was described as a "firm offer" to sell to Orlen CIF Butinge, Lithuania 25,000 metric tons +/- 10% in the Seller's option of Crude Oil Mix CN27090090, European origin as per the specifications attached, with delivery period at the discharge port during 10-15 July 2012 and at a price based on five quotations after the bill of lading date. Email correspondence continued between the parties on the same day, culminating in a one-word email from Orlen stating "Confirmed". On 20th June 2012,
Proton
sent Orlen a draft detailed written contract for the sale. The draft terms of this written contract provoked further email exchanges and ultimately a revised draft which
Proton
sent to Orlen on 27th June 2012. By this stage, there was at least one issue on which the parties had not agreed: namely, the documents which
Proton
would be required to present for payment under a proposed documentary letter of credit. On 29th June 2012, Orlen wrote to
Proton
to say that it was withdrawing from the negotiations. It did not open any letter of credit and it did not accept the cargo. On 2nd July 2012,
Proton
notified Orlen that it was accepting Orlen's failures to open a letter of credit or to take delivery of the cargo as repudiatory breaches of contract and was thereby bringing the sale contract to an end."
Proton's
Finance Officer, and Ms Elena Isaieva, a trader, gave evidence for the Claimant. Mr Tomas Armalis, Procurement Manager at Orlen gave evidence for the Defendant. Mr Roger Sepkes, director and principal of Asdem, an oil and oil trading consultancy gave evidence as expert for the Claimant and Mr Stuart Traver, a Principal at Gaffney Cline, the international oil and gas advisory firm, for the Defendant.
Has a contract been entered into?-the law
"The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement."
Lord Clarke (at para 49) also approved the following statements of principle set out in the judgment of Lloyd L.J. in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 619:
"(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole ... (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed ... (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled ... (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty. .... It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge [at p 611] 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'."
The witnesses of fact
Proton
and his personal involvement in the events giving rise to the dispute was limited. Thus he had no contact with Orlen or Trafigura. His evidence was more concerned with aspects of damages and mitigation which in the end were not very controversial.
Proton's
main witness. She became a trader in 2010 after experience as a brand manager in the tobacco and perfume industries. As a result her trading experience by June 2012 was limited. Ms Isaieva has very good but not perfect command of English and, as with Mr Armalis , it would be unfair to expect precision in her choice of English words in the correspondence and to scrutinise her use of language too closely. Ms Isaieva was an honest but inexperienced witness who at times seemed to be looking for the convenient rather than the accurate answer. She did not dispel a concern that
Proton
had been less than candid with Orlen when seeking to blur the distinction between net and gross when discussing the Bill of Lading and related matters.
The documents recording the dealings between the parties
Proton
sent an "INDICATIVE OFFER" to Orlen for the sale of some 25,000 metric tonnes of an oil blend described as the Product, attaching the specifications and the Q88 for the carrying vessel, M/T "HIOTISSA"/sub, and specifying, "All other terms and conditions as per seller's standard CIF contract" and "This offer is valid till 12.06.2012 COB." Although described as "Oil blend", the nature (and value) of the feedstock could only be determined from the technical distillation data attached to the email, which explained how much of the cargo would condense at different temperatures. The same technical data was attached to every subsequent proposal and draft contract sent by
Proton.
Proton
forwarded additional documents for the carrying vessel, Orlen responded on 12 June stating, "Unfortunately, this vessel cannot be accepted by Butinge (the Orlen terminal). Thanks for your offer anyway".
Proton's
option of the Product CIF Butinge, Lithuania. The Offer warranted the Product to be "European origin" and set out a number of other terms including "UK law; London Courts" and "All other terms and conditions as per seller's standard CIF contract". "This offer is valid till 14.06.2012 COB and we would appreciate your kind reply in respect of this timing" .
Proton
agreed to the first three of those four changes proposed by Orlen and responded on the fourth issue as follows:
"4. Contractual price is fixed as per the confirmed offer. All other contractual terms not indicated into the offer shall be discussed and mutually agreed between parties upon contract negotiations."
Mr Armalis replied at 13:42: "Confirmed"
Proton
says that at this point a contract came into existence. Orlen disagrees.
Proton
was required to find and nominate a vessel technically acceptable to Orlen by 23rd June, Orlen was required to narrow the laycan by 1st July and delivery at the discharge port was estimated to take place during 10th – 15th July 2012. At 15:55 that day, 14th June,
Proton
entered into a contract (by an unsigned email recap) to buy the Product from its supplier, Trafigura. In turn on 20th June, Trafigura voyage chartered the MT "APOSTOLOS A" to carry the Product from Couronne, France to Orlen's terminal at Butinge, Lithuania. At 17:09 on 14th June, Ms. Isaieva wrote to Mr. Armalis, thanking him for "the deal" and providing him with Ms. Ben-Hasid's contact details as she was responsible for Operations and would be taking the transaction forward.
Proton
requested Orlen's technical acceptance of MT "APOSTOLOS A" as the carrying vessel under the Contract. On 20th June, Orlen provided that acceptance and agreed the delivery window of 10th – 15th July 2012. Orlen prepared a "MEMORANDUM REGARDING MT APOSTOLOS A ACCEPTANCE IN BUTINGE TERMINAL" signed by it's Director of Pipelines and Offshore Terminals (Linas Bauzys), its Deputy General Director for Logistics (Danielia Kreloyska), and its General Director, Ireneusz Fafara, granting the MT "APOSTOLOS A" special dispensation to discharge the Product at Butinge Terminal even though her deadweight was only 46,000 mts and the minimum summer deadweight allowed at the Terminal was 80,000 mts. That Memorandum recorded that Orlen had "procured around 25,000 tons of blend crude oil … to be shipped to Butinge."
Proton.
Each draft of the detailed contract terms sent by
Proton
to Orlen (on 20th, 22nd and 27th June) began with the sentence, "WE ARE PLEASED TO CONFIRM OUR SALE OF OIL BLEND CONCLUDED ON 14TH JUNE 2012 ON THE BELOW TERMS AND CONDITION OF CONTRACT". Each draft until 26 June 2012, referred to the contractual quantity as 25,000 MT +/- 10% at
Proton's
option (i.e. a range of 22,500-27,500 MT).
Proton
had improperly suggested that the Bill of Lading should not record the fact that the shipment was gross. The issue is not directly relevant. However I prefer the recollection of Mr Armalis to that of Ms Isaieva about this issue, (the other person involved, Mr Moiseev, did not give evidence), but there remains the possibility that there was a linguistic misunderstanding).
Proton
was informed by Trafigura that only around 21,500 MT of Product would be available. Without disclosing this to Orlen Ms Isaieva instead wrote:
"Furthermore, we would like to advise you that due to our acceptance of your first comment regarding net quantity of deduction of water, contractual quantity shall be read as 20,000 to 25,000 metric tonnes and will be changed in the contract accordingly."
Proton,
in the form of Ms Isaieva's superior Mr Moiseev, had acted inappropriately.
Proton
a letter terminating negotiations.
Expert evidence
"a) Oil trading can be divided into several market segments: exchange based, and "over the counter", "paper" and "physical", speculation and refinery supply. If crude oil transactions take place directly between companies, they are known as "over the counter" transactions. Contracts that contemplate physical delivery of product are known as physical trades. Crude oil transactions that are entered into for the purpose of supplying refineries with feedstock are, self-evidently, refinery supply transactions.
b) Refineries are owned by international oil companies ("IOCs"), national oil companies ("NOCs") and regional independent refining/marketing companies. (It is common ground between the parties in this case that Orlen is, or is the equivalent of, an NOC.)
c)Proton's
firm Offer of 14th June 2012 was in short form and known in the international oil and gas industry as a "Recap". It set out the key commercial terms of the proposed transaction.
d) The confirmation of a Recap offer is often considered binding in over the counter paper transactions where no physical delivery is contemplated. This is because the parties to the transaction are speculators and, as the prices of oil products are in constant motion, the seller must lock the buyer in.
e) In contracts for physical delivery, the confirmation of a Recap offer is often considered binding where the seller has a long-term mandate to supply a refinery with feedstock. This is because the detailed general contractual terms and conditions will already have been agreed between the parties either in a framework agreement or through consistent application. For this reason, the parties need only agree the key commercial terms for a binding contract to be created between them.
f) A Recap is not considered binding in the market in cases involving sales to an NOC. This is because NOCs typically have set supply contracts which suppliers must accept before an oil trade is bound. The supply agreement is only considered binding once both parties to the transaction have signed.
g) A Recap is not considered binding by participants in the oil trading industry when a transaction for the sale and delivery of crude oil mix to a refinery is viewed as a "once-off" event: i.e. as a one-off transaction and not part of a prior course of dealing between the parties.
h)Proton's
Recap dated 14th June 2012 and Orlen's confirmation of it (after agreed revisions) would not have been understood by reasonable market participants as creating a binding contract. On the contrary, they would have understood Orlen's confirmation to have been subject to contract or equivalent. It was not necessary for Orlen to have expressed its confirmation in those or similar terms because the reasonable market participant would have understood that to have been the case from the nature and circumstances of the transaction proposed."
Was there a contract? – Submissions of the parties
Proton
needed to know, at least as regards that particular offer, before close of business whether it had a binding contract of sale or not. This "firm," time-limited offer "did not admit of languid negotiation" according to the Deputy Judge but demanded an immediate, binding commitment. Thirdly this was spot business requiring an urgent commitment from Orlen. This was reiterated in the email sent by
Proton's
Mr. Judzentis to Orlen's Mr. Armalis only a few minutes after the "Firm Offer" in which he explained that "Confirmation on coordination of conditions is needed urgently, and then let's move towards the contract". Fourthly the urgency was further highlighted by the fact that there was very little time until performance of the deal.
Proton
was required to find and nominate a vessel technically acceptable to Orlen by 23rd June, Orlen was required to narrow the laycan by 1st July and delivery at the discharge port was estimated to take place during 10th – 15th July 2013.
Proton
contracting at once with Trafigura, passing the matter to the operations person and seeking and obtaining acceptance of the vessel from Orlen. He also points to the Memorandum prepared by Orlen itself and then sent, signed, to
Proton.
group
politics so that it was clear Orlen Lietuva was acting consistently with the wishes of its parent company. This is reinforced by Mr Traver's expert evidence as to the understanding in the market in relation to such transactions. This understanding is reinforced by the parties' two prior transactions. The first in May 2011 involved a detailed written contract signed by
Proton
and no fewer than four signatories from Orlen, including the General Director. The second was also a detailed written contract signed on Orlen's side by three signatories, again including the General Director. This was not a case in which there were pre-agreed general terms and conditions, which could simply apply.
Proton
did not simply send out the old contract but included both terms that were deal specific and also those reflecting the draft from Trafigura.
Proton's
argument that a contract must have been concluded because the offer was urgent, since much had to be done in the following month cannot stand in the light of Ms Isaieva's frank admission that she was not considering the question of timing.
Proton
regarding the draft, indicating requirements in peremptory terms demonstrating that Orlen did not consider that it was bound.
Was there a contract?-Decision
Proton,
committed to Trafigura contractually as soon as this deal had been confirmed. This shows that it regarded itself as committed to Orlen but does not mean that it was- particularly where the trader was inexperienced. But the fact that Orlen also saw itself as committed means that both sides did. There may well have been internal politics within Orlen but that is no reason to doubt the truth of the firm terms in which the deal was described and progressed within the company. Mr Armalis may have expressed himself in subsequent negotiations in terms which did not seem consistent with a binding commitment being in place but that is often the case when the details are being negotiated. The expert evidence, which could not be evaluated at the application for summary judgment and which influenced the Deputy Judge, adds nothing. From now on I shall refer to this transaction as the "Contract".
Implied term
Proton
disagrees.
Proton
that the origin of the cargo was France, Orlen was concerned about the ultimate origin of the oil (i.e. where it came out of the ground) because France is not a significant producer of crude oil, and it is unusual for French refineries to produce part-refined products. A "T2L" is an EU customs document which is necessary for intra-EU transfers. It provides assurance that the goods have been either (i) produced within the EU, or (ii) already imported and any duties paid. Mr Armalis understood that without a T2L, Orlen could have been responsible if the cargo had been Iranian. On the 26th June Orlen would otherwise come under an obligation to open a letter of credit, thereby incurring cost. It is not enough that Orlen would have been entitled to reject the Product if the cargo was in fact Iranian – the problem was that Orlen did not know whether the cargo was Iranian (and might well still not know having received the product, processed it and sold the resulting refined products) nor would Orlen's consequent rights against
Proton
for damages be sufficient. Orlen knew that
Proton
is a small company which might not have been able to pay damages.
Proton
says that there was "not a whisper" of this alleged condition precedent in contractual correspondence. The Contract specified the origin as part of the Product's description. Origin was expressly provided for so there is no room to imply a term. Orlen's suggestion that at or around 14th June 2012 there might be lots of cargoes which people would be trying to trade before the sanctions kicked in is wrong. Council Regulation (EU) No 267/2012, which contained the sanctions, entered into force on 24th March 2012, the day of its publication in the Official Journal of the European Union. Further Orlen only became suspicious about the origin of the cargo after 14th June. Orlen was reasonably satisfied as to the Product's origin at the time of the Contract's conclusion, which is apparent from the contemporaneous internal correspondence between Mr. Armalis and his superior Mr. Fafara. ("We got confirmation that this product from France. So there is no questions pending"). Furthermore the condition precedent for which Orlen contends found no expression in the parties' discussions.
Proton,
answers were given and the matter remained live in the discussion about the T2L. There is no hint in the correspondence (particularly before the Contract was entered into) to justify an implication in the form alleged. Terms are not implied because it would be reasonable or useful to do so, necessity is still required – see, as cited by Mr Karia, the remarks of Lord Clarke MR in The Reborn [2009] 2 Lloyd's Rep 639 at para 15:
"… as I read Lord Hoffmann's analysis [in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988], although he is emphasising that the process of construction of the contract, he is not in any way resiling from the often stated proposition that it must be necessary to imply the proposed term. It is never sufficient that it should be reasonable. This point is clear, for example, from the well-known speech of Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, where he rejected at page 253H to 254A the approach of Lord Denning, which was to permit the implication of reasonable terms."
Did
Proton
repudiate the Contract?
Proton
had evinced an intention not to perform its obligations in some essential respect. I repeat the text of that email:
"Furthermore, we would like to advise you that due to our acceptance of your first comment regarding net quantity of deduction of water, contractual quantity shall be read as 20,000 to 25,000 metric tonnes and will be changed in the contract accordingly."
Proton
a letter terminating negotiations.
Proton
argues that Orlen accepted its offer which was not, in any event, a breach. It points to the context of the email and to Mr Armalis' response on 26 June commenting on a number of points but not disagreeing with the proposed change in quantity. Mr Karia submits that Ms. Isaieva was not imposing the change on Mr. Armalis. Her email was intended to form a basis for further discussion, if necessary. In evidence she said "Supposing, then, that… Mr. Armalis has any objections on this comment, he may revert. Always, if he has some objections he can revert saying: no, it's acceptable". However the Court is not at this point concerned with subjective intention.
Damages
Proton
claims damages amounting to "at least" US$ 1,363,255.59. Orlen claims that
Proton
suffered no loss and also raises several issues about the amounts claimed.
Did
Proton
suffer any loss?
Proton
suffered no loss for two alternative reasons, misdescription and misrepresentation.
Misdescription
Proton
would have supplied was materially different from its description. In determining whether to buy a non-standard oil product, refineries need to know the composition of the product.
Proton
attached a specification of the product to all its offers and drafts. Orlen used that specification to determine the products which could be made from the cargo and therefore the amount it would be willing to pay to make sufficient additional profit (when compared to its regular feedstock) for the deal to be worthwhile.
Proton
itself to Trafigura on 30 June 2012, as:
"…there is a sharp deviation in a several parameters which are guaranteed in our Contract..."
Proton.
Proton
responds that in reality, as Mr. Armalis conceded in cross examination, rejection was unlikely. He had never rejected a product which had been delivered to Orlen, he did not know of the possibility of rejecting the Product on the basis that it failed to comply with its specification and would have been unlikely to reject a cargo that he had worked hard to fix.
Was the specification part of a sale by description?
"A buyer can refuse to receive something which is not what he promised to buy. The description of goods may be strictly interpreted with the result that a slight discrepancy may be treated as making the goods not what was stipulated for. Where goods are not what was stipulated for, they can be rejected." 11-004.
He also refers to Ashington Piggeries v Christopher Hill Ltd [1972] AC 441 at 503, where Lord Diplock said:
"The 'description' by which unascertained goods are sold is, in my view, confined to those words in the contract which were intended by the parties to identify the kind of goods which were to be supplied … Ultimately the test is whether the buyer could fairly and reasonably refuse to accept the physical goods proffered to him on the ground that their failure to correspond with that part of what was said about them in the contract makes them goods of a different kind from those he had agreed to buy. The key to s.13 is identification."
Proton
asked Orlen whether calling the product "Crude Oil Mix" was acceptable for it. This illustrates that the name applied to the product was a label of convenience, not something of fundamental importance.
Proton
would have had to comply with it in every respect as a condition of the deal. Of course in another deal those considerations might have been addressed in the terms of the contract but they do point to the specification being the specified quality of the oil blend CN2710 and not part of its description. Further the fact that a buyer would not purchase without knowing the specification is as much an indication of concern about quality as it is about description. The parties are always free to make the quality a condition of the deal but, unlike description, it is not implied by statute.
Proton's
case is that it was required to deliver a minimum of only 20,000 MT of product because Orlen had agreed to amend the quantity under the Contract to 20,000 to 25,000 MT net in seller's option. I have rejected that argument above. However
Proton
argues that it had the ability to source the required additional 5,000 MT of a similar product, to make up the alleged shortfall in quantity, had Orlen indicated that it did not agree to the amendment.
Proton
had offered 5,000 MT of a similar product to Orlen by email on 21st June at 14:58. Even if that parcel had been sold to another buyer (of which there is no evidence), Ms. Isaieva explained in cross examination that
Proton
would have been able to find some feedstock at Le Havre. I have no reason to doubt that and it is no answer for Orlen to say that the additional product would also have differed from the precise specification.
Misrepresentation
Proton
would have been entitled to rescission.
Proton's
response is in the same groove. The discussions relied on preceded and led to the Contract. The alleged representation was as to the specification which was incorporated into the Contract as a warranty. In reality Ms Isaieva was warranting the specification, not making representations as to the facts. She was making a contractual offer in the same way as countless others do in commerce every day without being seen to make potentially actionable representations. Orlen was entering into the Contract in reliance on its terms not on the pre contractual statements. Moreover even if a claim in misrepresentation could otherwise be erected the discretionary remedy of rescission would not normally be used to convert an agreed warranty into, in effect, a condition.
Orlen's potential damages claim against
Proton
Proton
must be reduced accordingly. In principle that is correct but its application gives rise to further disputes.
Proton
contends that Orlen has adopted the wrong measure of damages, since the correct measure for both quality and short delivery depends on market value.
Proton
says that Orlen has claimed damages based only on its anticipated profits using its own internal model, not the market value. No evidence of the market value has been produced and the alleged loss is irrecoverable as being too remote.
Proton's
argument is unattractive. Its own evidence is that there is no market price for this blend. Mr Castro said "It is a tailored Product, rather than a standard Product that refineries buy on the market. Hence there is no standard market price available for such a cargo. Because the Product is a Crude Oil Blend, each refinery evaluates it in accordance with their own economic formula and the possible impact its addition might have on their equipment." The measure of damages as described in Section 53(2) and the rule in 53(3) is a prima facie one.
Proton
would have been well aware that Orlen were entering the deal to make a profit and Ms Isaieva accepted in evidence that she knew that the loss which would be suffered by any refinery would depend on its particular characteristics. Calculations based on the Model seem to me to be a just and accurate measure of the loss. Similar considerations apply to Section 51 and short delivery.
Proton
also argues that even if such loss of profits had been recoverable in principle this is precluded by Clause 23 of the Standard Terms to which the Contract was to be subject, which provides that "in no event shall the seller have any liability for any . . . loss of profit . . . or any type of special indirect or consequential loss". Orlen responds that in circumstances where there is no available market price, it cannot have been the parties' intention that loss of profits should be excluded by Clause 23 so as to debar any recovery whatsoever. Properly construed, Clause 23 excludes liability for loss of profit where it is a "special indirect or consequential loss", not where it is the ordinary and entirely foreseeable consequence of supplying a different specification of refinery feedstock.
Proton
are taken literally there would be no right to damages at all for breach of the warranty of quality or in respect of short delivery because the loss will always be almost entirely that of profit. I therefore prefer the approach of Orlen.
Proton
was required to deliver a minimum of 22,500MT. The contractual quantity, by Clause 12, was to be determined by reference to the Bill of Lading which records 20,883MT as being loaded onto the vessel. Orlen would therefore, subject to any other terms of the Contract, have been entitled to damages for short delivery of the same product. I have found that Orlen did not consent to any proposed change in the quantity. Ms Isaieva accepted in evidence that Orlen would not be able to provide more product of the same quality as set out in the specification.
Proton
contends that Orlen has failed to take account of the higher VGO content in the actual product which would have added value to the product, and slight variations in the product quality would not have affected the value of the product as alleged or at all. But Mr Armalis's evidence is that the VGO issue was taken into account. There is no evidence from
Proton
about that. So I reject that submission.
Proton
claims that had the product been delivered, Orlen would actually have received an additional 905 barrels when compared to the Bill of Lading quantity. Since it would only have paid for the Bill of Lading quantity, it would have received 905 barrels for free, so any damages reduction must itself be reduced by US$91,583.74. Ms Isaieva stated that the out-turn inspector's report was the best evidence of what was actually delivered. Orlen says that she failed to note that the net and gross figures were the same, and that around 1,000 barrels of water just disappeared. If
Proton
wished to pursue this technical issue it should have produced a witness qualified to express views about it. Ms Isaieva's experience was very limited and her evidence speculative. I did not have confidence in the views she expressed about the issue. Her evidence did not displace that of Orlen who have established that, on balance, their claim to deduct US$133,214.62 from any damages is justified.
Mitigation, inspection costs, additional freight, bunkers and miscellaneous
Proton
had failed to mitigate its damage or that these other items were not recoverable.
Demurrage
Legal costs of defending action in Lithuania
Proton
claims CHF 14,614.79 for Orlen's failure to nominate an address in England for service and commencement of proceedings in Lithuania in breach of Clause 20 of the Contract. Of course there was no Clause 20 in the Contract on 14 June so the matter is put on the basis that this is what the Contract would have said but for the repudiation.
Proton
Energy
Baltic, the Claimant's Lithuanian agents.
Proton
suffered losses as a result. However Orlen says that the Contract concluded on 14 June 2012 included no language of exclusivity, and none should be implied. But as I see it Clause 20 would have been a term but for Orlen's repudiation.
Proton
Baltic is not a party to the Contract so its costs are not recoverable by
Proton.
That leads in turn to a potentially complex issue about agency followed by detailed points on the costs which, in the interests of proportionality, I decline to decide. I will award CHF 5,000 to
Proton
for this aspect of its claim looking at the matter broadly as one would on the small claims track in the County Court where this item, if taken alone, would belong. If this broad approach is unacceptable to either party it may apply to have the issue determined in detail- but on risk that it may have to pay the indemnity costs of disproportionate litigation.
Conclusion
Proton to reflect the decisions recorded above. If the precise sums cannot be agreed I will decide them at the hand down of this judgment.