Commodities trader Glencore has won permission from London’s High Court to pursue a claim worth about $236 million against the collapsed Prax Lindsey refinery, opening another legal front in the fallout from the insolvency of the northern England oil business.
The London-listed company is seeking to recover crude oil it supplied to Prax before the refinery’s collapse last year, or the traceable proceeds from crude that was subsequently refined and sold. Because Prax Lindsey Oil Refinery Limited is in liquidation, Glencore needed approval from the High Court before it could bring the claim.
Judge William Trower granted that permission on Monday, rejecting an objection from the Official Receiver, which is overseeing the liquidation.
Register for the next Tekedia Mini-MBA.
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
The ruling does not establish that Glencore is entitled to recover the full amount it is seeking. Instead, it allows the trader to pursue its case and attempt to identify crude oil or proceeds that can legally be traced to the supplies it provided.
The dispute centers on the 113,000-barrel-per-day Lindsey refinery, which supplied about 10% of the UK’s petrochemical needs before Prax’s collapse. The refinery was eventually acquired by US refiner Phillips 66 following a prolonged sale process earlier this year.
Glencore was the refinery’s exclusive crude supplier until Prax collapsed. The trader argues that it supplied crude based on representations by Prax’s former chief executive, Winston Soosaipillai, about the financial condition of the business.
The case is connected to allegations surrounding a £738 million ($987.6 million) securitization facility involving Prax companies. Glencore alleges that Soosaipillai fraudulently misrepresented Prax’s financial position and that the wider financing arrangement involved at least £334 million of fictitious invoices.
Soosaipillai is also facing separate litigation brought by administrators of the wider Prax group. Lawyers representing him in that case declined to comment on Glencore’s latest proceedings.
Soosaipillai has previously denied allegations of dishonesty. In a statement to the Financial Times in June, he said he had “always acted in good faith” to protect the refinery and described allegations of dishonesty as “untrue and offensive.”
The High Court ruling underpins the complexity of recovering commodities after they have moved through an industrial supply chain. Glencore is not simply seeking payment from an insolvent company. It is attempting to establish that specific crude oil, or money generated from that crude, can still be identified within assets controlled by the liquidators.
That development may really matter because crude supplied to a refinery is transformed through the refining process into multiple petroleum products. Once those products have been sold and proceeds have moved through different accounts, establishing a direct connection to the original commodity can become considerably more difficult.
Judge Trower acknowledged that Glencore could face difficulties tracing crude that had already been refined. But he concluded that the trader had “a seriously arguable case” that at least some of the relevant assets could be traced.
The decision therefore gives Glencore an opportunity to test its proprietary claims in court, rather than simply competing with other creditors for a share of whatever assets remain in the Prax estate.
The case is also part of the wider financial fallout from Prax’s collapse. The refinery was a significant industrial asset, but its failure has generated disputes involving commodity suppliers, lenders, administrators and other parties seeking to establish claims over assets and transactions that preceded the insolvency.
For Glencore, the stakes extend beyond an ordinary unpaid commodity invoice. If the company can establish a proprietary claim over identifiable crude or its proceeds, it could potentially recover assets ahead of creditors whose claims are limited to the general insolvency estate.
The next stage is expected to focus on tracing the crude and determining whether the evidence supports Glencore’s claim over particular assets. The High Court has allowed the case to proceed, but the eventual recovery will depend on what Glencore can establish through that process.