Background
Glencore Energy UK Ltd supplied crude oil to Prax Lindsey Oil Refinery Limited under a framework of agreements that included separate sales confirmations for individual cargoes. After PLOR entered compulsory liquidation in June 2025, Glencore alleged that five sales confirmations, covering more than US$230 million of unpaid oil, had been induced by fraudulent misrepresentations concerning PLOR’s financial condition, solvency, contractual compliance and related matters.
Glencore sought permission under section 130(2) of the Insolvency Act 1986 to commence proceedings for equitable rescission of those five sales confirmations, an account of profits, and declarations that oil or traceable proceeds were held for it on constructive or resulting trust. PLOR opposed permission, arguing principally that post-liquidation rescission was unavailable and also relying on the prohibitions against partial rescission, alleged affirmation by Glencore, and the asserted impossibility of tracing crude oil through the refinery’s mixing, transformation and sale processes.
The Court’s Holding
Mr Justice Trower granted Glencore leave to commence and pursue the proposed proceedings. The court did not finally decide whether Glencore was entitled to rescission or any proprietary remedy. It held only that Glencore’s case was genuinely arguable and raised sufficiently serious and substantial questions for trial.
The court found serious issues to be tried as to whether each sales confirmation was a separate, severable bargain; whether Glencore had affirmed the contracts after obtaining sufficient knowledge of the alleged fraud; and whether it could trace value attributable to the unpaid crude oil into refined products or proceeds remaining with the liquidator. Because the proposed action was essentially a proprietary claim rather than merely a claim for a dividend, determination through the liquidation proof process was inappropriate, and no more convenient alternative procedure had been identified.
Key Takeaways
- Leave under section 130(2) may be granted where a claimant advances a seriously arguable proprietary claim that cannot appropriately be resolved through the ordinary proof-of-debt process.
- The ruling did not establish fraud, order rescission, or recognize a trust; those merits remain for trial.
- Complex mixing and chemical transformation did not make tracing necessarily futile at the permission stage because equitable tracing may follow attributable value rather than particular molecules.
Why It Matters
The decision permits a claim potentially affecting the statutory distribution of a major insolvent estate to proceed to trial. If Glencore ultimately establishes rescission and tracing, its recovery may be proprietary rather than limited to its ranking in the insolvency waterfall, with significant consequences for public-funding and preferential claims.
The judgment also underscores the limited merits inquiry on an application for leave: difficult, fact-sensitive defenses such as affirmation, severability and tracing ordinarily should not be finally resolved at that preliminary stage when the claimant has shown a substantial issue requiring adjudication.