Glencore Energy UK Ltd v Prax Lindsey Oil Refinery Ltd

The facts of the case are complex; a brief summary must suffice.

Prax Lindsey was a member of a group of companies which dealt in crude oil, petroleum products and biofuels. It operated a refinery in North Lincolnshire. At the end of June 2025 a number of key companies in the group went into compulsory liquidation and administration. On 30 June 2025 a winding up order was made against Prax Lindsey on a winding up petition presented the previous day by the company’s sole director, Mr Winston Soosaipillai. The official receiver became liquidator and remains in office assisted by four special managers.

Glencore had supplied crude oil to Prax Lindsey under terms that provided for the securing of payment obligations governed by a number of agreements, the precise terms of which are not relevant for present purposes. Shortly before Prax Lindsey went into liquidation, Glencore served a series of notices, demands and letters on Prax which suspended performance of its obligations under key agreements. Glencore also made demand for immediate payment of  some US$53 million said to be outstanding, gave notice of crystallisation of a floating charge it held and withdrew Prax Lindsey’s permission to dispose of product without Glencore’s consent or to supply crude oil to which Glencore claimed it was entitled.

On 22 October 2025, Glencore’s solicitors wrote to Prax Lindsey contending that their client had a claim for rescission of the agreements it had entered into with Prax Lindsey for the supply of crude oil for which it had not received payment. They also contended that Glencore had a constructive trust claim to any assets into which it could trace the product it had supplied, including the proceeds of sale of refined product. They made clear that their client was making no election in respect of their proprietary or personal claims. In the proposed proceedings that were the subject of the application before Trower J, Glencore alleged that, shortly after the commencement of Prax Lindsey’s liquidation, it was exposed to losses of US$267 million in respect of sales for which it had not received payment and to losses of US$177 million in respect of crude oil it had supplied which was stored at the refinery and to which it had title, and US$64 million for vacuum gas oil for which it had not been paid. The heads of relief sought in draft particulars of claim before the court were equitable rescission of five sales confirmations pursuant to which Glencore had supplied crude oil worth in excess of US$230 million, an account of profits, a declaration that certain oil and/or its traceable proceeds were held on constructive or resulting trust for Glencore, and consequential orders for delivery up. It was also alleged that sales confirmations had been induced by fraudulent misrepresentations made by Prax Lindsey prior to its liquidation.

Trower J set out a number of propositions relevant to the exercise of the court’s discretion when dealing with an application for leave to proceed against a company in liquidation, noting first that “[i]t has often been said that it is not possible to state exhaustively all of the circumstances in which leave to proceed may be granted and that the section gives the court a free hand to do that which is right and fair according to the circumstances of the case: In re Aro Co Ltd [1980] Ch 196 at p. 209F/G.” However, he went on to say, “it is self-evident that the court’s decision as to what is right and fair must have sufficient regard to the purpose for which the stay is imposed.” The main purpose, he said, was to preserve the limited assets of the company in liquidation from being eroded by the costs of litigation and to oblige creditors to engage in the more orderly and convenient process of proving in the liquidation for the amounts to which they were entitled in accordance with the statutory scheme: Gardner v Lemma Europe Insurance Co Limited [2016] EWCA Civ 484.

The exercise of the discretion the court had to exercise therefore involved considering the nature and merits of the claim in respect of which leave was sought. Any investigation should, however, be limited, such that “the court should not investigate the merits of the claim beyond determining that the claim is genuinely arguable and gives rise to a sufficiently serious or substantial question to be tried. If it does not do so that is likely to be a good ground for refusing leave. But, even if it does, where the claim is a provable debt within the meaning of rules 14.1 and 14.2, leave is unlikely to be granted if it is more convenient for the dispute to be resolved by the process of proof in the liquidation…combined as it is with the ability of the disappointed party and indeed any other dissatisfied creditor to appeal to the court against the liquidator’s decision (see rule 14.8).” The court, the judge noted, will often refuse an unsecured creditor leave to proceed, but may not do so where the creditor also has proprietary rights in assets held by the debtor. Where that is the case, the court will normally grant leave to proceed because the creditor is seeking to enforce a right not against the company but to its own property. That reasoning also applied where the creditor was asserting an equitable proprietary interest in property held by the company at the time of liquidation: in such a case, the creditor was again seeking to enforce, outside the winding up, rights to its own property (cf a claim for specific performance, as was the case in Re Coregrange Ltd [1984] BCLC 453). Glencore submitted that the same approach should be adopted by analogy in relation to its claim for rescission, in particular where (as here) the basis for rescission was said to be fraudulent conduct of the company’s affairs.

As to that, Trower J said:

“I do not accept that the analogy is a complete one. Unlike a claimant with a right to specific performance, a person with a claim to rescind for fraudulent misrepresentation is not treated as the owner in equity of the property to which its claim extends until such time as the exercise of its right to rescind takes effect. Nonetheless, if the disputed rights which Glencore seeks to exercise are or include rights other than claims in respect of which its only remedy is to prove for a dividend, an action outside the winding-up may be the only appropriate means for determination of the dispute.”

In spite of that reservation, Trower J went on to give Glencore leave. He found that Glencore had a sufficiently serious and substantial claim to rescind and to trace into Prax-owned product or its proceeds. No more convenient means of determining the dispute between the parties had been identified; the purposes of the s 130 stay identified in Gardner v Lemma were not engaged:

“[T]he nature of the dispute is such that this is not a case in which that determination can appropriately be dealt with by the OR making a decision on a proof submitted by Glencore. Its essence is that of a proprietary claim in which Glencore seeks to establish an entitlement to trace into property which it says represents property that will have revested in it on rescission. The merits are sufficiently arguable, which means that the dispute must be determined by some means or other so that the estate can be fully wound up. In such cases, and like the different but sufficiently similar case of Coregrange, it is long-established that it will normally be right and fair for leave to proceed to be granted (Re David Lloyd & Co (1877) 6 ChD 339).”

The OR had not suggested that there was any reason to suppose that granting leave would interfere with the efficient administration of the estate, that defence of Glencore’s proceedings might be dealt with more conveniently at a later stage in the liquidation, or that an application for directions (such as that made in Crown Holdings (London) Limited  Crown Holdings (in liquidation) [2015] EWHC 1876 (Ch)) would have any procedural or other advantage over proceedings in the form proposed by Glencore.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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