Glencore wins right to pursue $236 million proprietary claim against Prax Refinery

The High Court has granted Glencore Energy UK Ltd permission to pursue a proprietary claim against Prax Lindsey Oil Refinery Limited, finding it seriously arguable that a creditor induced by fraud to transfer property can rescind the transaction after the company has entered liquidation and trace into the resulting assets or proceeds.

Justice Trower’s ruling opens the door for Glencore to seek equitable rescission of five crude oil sales confirmations covering more than US$230 million of oil supplied to Prax Lindsey, together with declarations that oil or its traceable proceeds are held on constructive or resulting trust. The application arose under section 130(2) of the Insolvency Act 1986, which requires court permission to commence or continue proceedings against a company in compulsory liquidation.

Prax Lindsey, part of the wider Prax Group, operated the Lindsey refinery in North Lincolnshire, then one of six major UK refineries and responsible for approximately 10% of the country’s petrochemical supply. It was wound up on 30 June 2025, with the Official Receiver appointed liquidator and Matthew Callaghan, Andrew Johnson, Joanne Hewitt-Schembri and Samuel Ballinger of FTI Consulting appointed special managers to assist him.

Under a series of agreements dating from July 2024, Glencore was the refinery’s exclusive crude oil supplier. Oil was initially sold to Prax Lindsey, repurchased by Glencore once it reached segregated storage tanks, and then sold back to Prax Lindsey when withdrawn for refining. The five sales confirmations now challenged were entered into between 1 April and 7 May 2025, with deliveries scheduled between 8 May and 4 June.

When the group collapsed, Glencore alleged that it was exposed to US$267 million of losses relating to oil already withdrawn for refining but not paid for, as well as US$177 million of crude still held in storage and US$64 million of unpaid refinery feedstock. A post-liquidation deal resulted in Prax Lindsey paying US$314 million for crude and feedstock still on site, together with a US$40 million processing fee, allowing the refinery to continue operating temporarily. The deal did not resolve the unpaid oil already taken into the refining process, for which Glencore says US$236.2 million remains outstanding.

The stakes extend well beyond the bilateral dispute. The Department for Energy Security and Net Zero provided public funding for the refinery’s orderly wind-down, which the Official Receiver considers a post-appointment expense ranking ahead of Glencore’s floating charge. On the liquidator’s current estimates, the estate already faces a base-case shortfall to the government. If Glencore’s proprietary claim succeeds, that shortfall would increase significantly and HMRC, which ranks preferentially ahead of the floating charge, would receive nothing.

Glencore’s claim followed allegations in separate proceedings that Prax director Winston Soosaipillai had caused fictitious invoices and ineligible intercompany receivables to be inserted into the group’s £738 million securitisation programme. At least £334 million of invoices were alleged to be fictitious as of 13 June 2025, including more than £277 million said to remain outstanding. Glencore argues that representations made to it concerning the refinery’s solvency, financial condition and compliance with material contracts were therefore fraudulent and induced the five oil sales it now seeks to unwind.

The central insolvency question was whether liquidation itself prevented Glencore from obtaining rescission. Prax Lindsey relied heavily on Crown Holdings (London) Limited (in liquidation), a 2015 decision holding that an unexercised equity to rescind a fraudulently induced transaction did not survive corporate insolvency in a way that could defeat the statutory scheme for distributing assets among creditors.

Justice Trower declined to treat that proposition as settled. Although a right to rescind does not itself give the creditor a beneficial interest in transferred property before rescission occurs, he found substantial force in the argument that the right is more than a purely personal claim. Rather, it can be characterised as an inherent limitation on the title acquired by the fraudulent transferee. On that analysis, liquidation does not necessarily eliminate the equity simply because it had not crystallised into a proprietary interest before the winding-up order.

The Court was particularly sceptical of the distinction drawn in Crown Holdings between personal bankruptcy, where older authorities recognised that rescission could still be exercised, and corporate liquidation. Justice Trower said there was no obvious reason why a pre-existing equity binding property should survive bankruptcy but disappear in a liquidation, noting that insolvency ordinarily changes the procedure for enforcing existing liabilities rather than their substantive character.

He ultimately held that it is seriously arguable that Crown Holdings was wrongly decided and that Glencore’s right to rescind remained binding on the transferred property when Prax Lindsey entered liquidation. He also rejected, at least for purposes of the leave application, the argument that the right itself must simply be converted into a provable debt. A successful rescission and tracing claim would instead seek to identify property treated in equity as belonging to Glencore, rather than merely produce a monetary claim against the estate.

Prax Lindsey’s alternative defences will now have to be tested at trial. The Court found it seriously arguable that each of the five sales confirmations was a separate and severable bargain capable of being rescinded without unwinding the wider framework and supply agreements.

Questions also remain over whether Glencore affirmed the contracts by entering into the July 2025 settlement and allowing the refinery to continue processing and selling oil. Justice Trower said that issue was highly fact-sensitive, particularly because all of the disputed crude appears to have been refined before Glencore says it obtained sufficient knowledge of the alleged fraud to consider rescission.

Tracing presents another major hurdle. The refinery mixed multiple crude shipments, introduced third-party materials and chemically transformed the oil through a continuous refining process, making it impossible to track any particular cargo into a finished product. Nevertheless, the Court accepted that Glencore had an arguable case that equitable tracing could focus on value rather than particular molecules and could identify some proportion of remaining property or proceeds attributable to the unpaid oil.

Justice Trower therefore granted leave for the proceedings to continue, holding that the dispute could not appropriately be resolved through the ordinary proof-of-debt process. The essence of Glencore’s case is proprietary: if rescission succeeds, it will seek to trace into assets representing property treated in equity as having revested in it.

The ruling does not establish that Glencore owns any refinery assets or that its claim will ultimately outrank the government and other creditors. But it does put a significant question back in play: whether commencement of liquidation really draws an absolute line under an unexercised right to rescind a fraudulently induced transfer, or whether that equity can survive the insolvency and support a proprietary claim outside the statutory waterfall.

Read the decision here.

Edward Cumming KC and Ms Erin Hitchens, both of XXIV Old Buildings (instructed by Jones Day) acted for Glencore.

Joseph Curl KC and Clara Johnson, both of South Square (instructed by Slaughter and May) acted for Prax Lindsey Oil Refinery.