BOMINFLOT BUNKERGESELLSCHAFT FUR MINERALOLE MBH & CO V PETROPLUS MARKETING AG (THE "MERCINI LADY")

[2012] EWHC 3009 (Comm), QUEEN'S BENCH DIVISION, COMMERCIAL COURT, Mr Justice Hamblen, 30 October 2012

Sale of goods - Gasoil on specification at point of loading - Unsatisfactory quality of cargo later becoming patent - Capacity of gasoil to remain on specification- Estimate of sound and unsound value of cargo - Date of estimate

By a sale contract concluded on or about 9 January 2007, KG Bominflot agreed to buy and Petroplus agreed to sell 38,500mt +/- 10 per cent at the buyer's option 1 per cent EU qualified gasoil ex the BRC refinery in Antwerp at an fob price equivalent to the International Petroleum Exchange ("IPE") February 2007 contract, minus US$9.50 pmt. Prior to loading, shoretank samples of the gasoil were tested by SGS and the gasoil was certified to be on specification, including as to sediment content. The buyer accepted that it was at this time on specification. Loading on board Mercini Lady was completed on 17 January 2007. By the time the vessel arrived at El Ferrol only four days later, the cargo was off-specification as to sediment. Pursuant to a decision on preliminary issues (reported at [2009] 2 Lloyd's Rep 679), the term in section 14(2) of the Sale of Goods Act 1979 was to be implied into the contract. The buyer's case was that the rapid change in sedimentation proved that the gasoil was unstable on delivery and therefore unsuitable for any purposes for which gasoil was normally used. Although the sediment test made upon loading was satisfactory, the gasoil was not. The fact that the instability only manifested itself after delivery (in the form of increased sediment) was irrelevant. The remaining issues were mainly of evidence. The seller was in insolvent liquidation and had ceased to participate in the trial and most of the evidence was from the buyer. The judge found as follows. There was no evidence that the vessel was responsible for the elevated sedimentation rate. The gasoil was unstable on delivery at Antwerp and the instability led to the formation of and resulting increase in sediments over the short voyage to El Ferrol. Section 14(2B) required the fitness for purposes for all the uses for which gasoil of this description was commonly used. The seller was in breach of contract and liable to pay damages in respect of the losses suffered as a result by the buyer. The defect did not become patent until later and that, on discovery of the defect, the buyer at all times acted reasonably in seeking to minimise its losses in terms of the loss in value of the cargo. The loss directly and naturally resulting was that resulting from the actual resale of the gasoil and that the relevant date for calculation of the diminution in value of the goods was the date of that resale. The best evidence of the value of the gasoil at that time was the price reasonably achieved on the resale of the unsound gasoil. That was also the date at which the value of sound gasoil should be assessed. The best evidence of the value of sound gasoil at the time of the resale is the price reasonably achieved on the purchase of the substitute cargo on that date.