Great Elephant Corporation v Trafigura Beheer B.V. & Ors

A force majeure clause is construed according to its wording, but it does not ordinarily excuse a party from consequences arising from performance delegated to another where the relevant responsibility was undertaken by that party. For a corporate party, reasonable control is assessed by reference to the company as a whole, not merely to the individual who acted reasonably at the operational site. Choosing to bypass an available official channel, thereby creating a risk of delay, is ordinarily within the company’s reasonable control. An intervening unlawful or arbitrary act does not necessarily break the chain of causation where the original contractual breach created the situation in which the intervention occurred. Demurrage caused by the original breaches therefore remained recoverable in full.

The appeal arose from a Commercial Court decision by Teare J concerning demurrage and losses in a chain of FOB crude-oil sale contracts and a charterparty. The vessel Crudesky loaded Akpo condensate without the required Nigerian loading clearance, after the export-valve padlock was cut and in the absence of the DPR representative. The Nigerian authorities later detained the vessel until a fine imposed on Total was paid and the cargo documents were issued.

The judge held that the initial contractual breaches were excused by force majeure, reduced the charterparty demurrage to half rate from 7 September 2009, and rejected Trafigura’s claims against Vitol. The appeal concerned whether the relevant events were beyond the reasonable control of Total or the contracting parties, and whether the Minister’s later intervention broke the chain of causation.

1. Appeal allowed. The Owners’ claim for demurrage succeeded in full. Trafigura could pass the claim to Vitol, and Vitol could pass it to COOSI.
2. Force majeure clauses are exceptions clauses and must be construed according to their own terms. Ambiguity is resolved against the party relying on the clause. The concept of an event beyond a corporate person’s control sets a comparatively high hurdle: control is assessed by reference to the corporation as a whole, rather than only the conduct of an employee at the loading site (paras [24]-[25]).
3. Total had an official channel through its Lagos commercial department for obtaining loading clearance from the DPR in Lagos. Its decision to proceed through the local representative and to load without clearance was a choice carrying a risk. The resulting delay was therefore within Total’s reasonable control. The additional requirement of unforeseeability added little in these circumstances, since detention was foreseeable once the official channels were bypassed. Culpability was relevant at most as a consideration, not the decisive criterion (paras [22]-[32]).
4. Under the charterparty, Trafigura had assumed responsibility for loading. Total was therefore its agent for the purpose of the restraint-of-princes exception. Trafigura could not avoid demurrage by treating Total as outside the scope of the clause through the chain of delegated contracts (paras [29]-[30]).
5. The same reasoning applied to the FOB sale contracts. Vitol and COOSI had assumed responsibility for putting the cargo on board. Their force majeure clauses could not be relied upon in respect of a delay caused by the acts or defaults of those to whom that responsibility had been delegated. Vitol also could not rely on force majeure because its own breach of the obligation to procure compliance with the Procedure Guides had caused the supposed force majeure, contrary to the principle that a party cannot take advantage of its own wrong (paras [31]-[37]).
6. The Court of Appeal approved the approach in Fyffes Group Ltd v Reefer Express Lines Ltd (The Kriti Rex) and explained that Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum S.A. (No. 2) (The Marine Star) did not address delegated contractual responsibility and therefore did not inhibit that approach (paras [36]-[40]).
7. The Minister’s arbitrary demand for a US$12 million fine did not constitute a new intervening cause. The initial breaches created the circumstances requiring investigation, and the later detention had the same causal quality as the loss incurred before 7 September. Treating every arbitrary governmental act as breaking causation could encourage lawlessness (paras [43]-[47]).

• Court of Appeal (Civil Division): [2013] EWCA Civ 905. Appeal allowed. The Owners’ demurrage claim succeeded in full, and the liability was held capable of being passed down the contractual chain.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Decision of Teare J. The judge held that force majeure applied, awarded only half demurrage from 7 September 2009, and rejected Trafigura’s claims against Vitol.