PST Energy 7 Shipping LLC and Another (Claimants/Appellants) v O.W. Bunker Malta Ltd and Another

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Moore-Bick,Lord Justice McCombe,Lord Justice Longmore
Judgment Date22 Oct 2015
Neutral Citation[2015] EWCA Civ 1058
Docket NumberCase No: A3/2015/2335

[2015] EWCA Civ 1058

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Mr. Justice Males

[2015] EWHC 2022 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Moore-Bick

Vice-President of the Court of Appeal, Civil Division

Lord Justice Longmore

and

Lord Justice McCombe

Case No: A3/2015/2335

Between:
(1) PST Energy 7 Shipping LLC
(2) Product Shipping & Trading S.A.
Claimants/Appellants
and
(1) O.W. Bunker Malta Ltd
(2) ING Bank N.V.
Defendants/Respondents

Mr. Stephen Cogley Q.C., Mr. Jeremy RichmondandMiss Liisa Lahti (instructed by Ince & Co. LLP) for the appellants

Mr. Robert Bright Q.C., Mr. Marcus ManderandMiss Clara Benn (instructed by Allen & Overy LLP) for the respondents

Hearing date: 17 th September 2015

Lord Justice Moore-Bick
1

On 4 th November 2014 the first respondents, O.W. Bunker Malta Ltd ("OWBM") supplied 1,000 metric tons of fuel oil and 100 metric tons of gasoil ("the bunkers") to the vessel Res Cogitans at Tuapse pursuant to a contract which incorporated its standard terms of business. Those terms provided for payment 60 days after delivery and included a retention of title clause under which property was not to pass to the vessel's owners or managers until the bunkers had been paid for in full. Despite that, however, the contract also expressly provided that from the moment of delivery the vessel was entitled to use the bunkers for the purposes of propulsion.

2

OWBM had obtained the bunkers under a contract with the ultimate parent company of the group, OW Bunker & Trading A/S ("OWBAS"), which had in turn obtained them from another bunker supplier, Rosneft Marine (UK) Ltd ("RMUK"). RMUK had itself obtained the bunkers from one of its associated companies, RN-Bunker Ltd ("RNB"), which had facilities at Tuapse and made the delivery to the vessel. The contract between OWBAS and RMUK incorporated RMUK's standard terms which provided for payment to be made 30 days after delivery and also included a retention of title clause. It did not, however, expressly allow the owners to use the bunkers for the purposes of the propulsion of the vessel pending payment.

3

On 6 th November 2014 OWBAS announced that it was applying to the court in Aalborg for restructuring. The commencement of those proceedings constituted an event of default under a financing agreement which the group had entered into with the second respondent, ING Bank N.V. ("ING"), and as a result, ING asserted a right to recover as assignee the debt, if any, owed by the appellants to OWBM in respect of the supply of the bunkers.

4

On 17 th November 2014 RMUK, having become aware that it might not receive payment from OWBAS, asserted that it remained the owner of the bunkers and indicated that it would seek payment from the appellants, who are the owners and managers respectively of the vessel. (Since their positions are the same as far as the present proceedings are concerned, I shall refer to them together simply as "the owners".) The owners have paid neither OWBM nor RMUK. Part of the bunkers supplied to the vessel at Tuapse had been consumed in the propulsion of the vessel by the time the 30-day period of credit allowed under RMUK's terms expired and the whole of them had been consumed for that purpose by the time the 60-day period of credit allowed under OWBM's terms expired.

5

In early December 2014 the owners began arbitration proceedings against OWBM and ING seeking a declaration that they were not bound to pay either of them for the bunkers supplied to the vessel at Tuapse, or, in the alternative, damages for breach of contract, on the grounds that OWBM had been unable to pass title in the bunkers to them. In the event, the tribunal agreed to determine as preliminary issues a number of questions formulated by the parties. They included the following:

(i) whether OWBM had property in the bunkers at any material time (Issue 1);

(ii) whether the retention of title clause in OWBM's terms prevented property in the bunkers from passing to the owners (Issue 3);

(iii) whether OWBM could recover the price of the bunkers under section 49(1) of the Sale of Goods Act 1979 (Issue 4);

(iv) whether OWBM had any other claim under the contract (Issue 6(a));

(v) whether the Sale of Goods Act 1979 applied to the contract between OWBM and the owners (Issue 9).

6

By an interim award published on 16 th April 2015 the arbitrators determined all but one of the preliminary issues. They held that the effect of OWBM's terms, in particular the combination of the retention of title clause and the clause giving the owners the right to use the bunkers for the propulsion of the vessel in advance of payment, was that it did not undertake to transfer property in the bunkers to them and that therefore the contract was not one for the sale of goods within the meaning of the Sale of Goods Act. As a result, OWBM could not recover the price of the goods under section 49 of the Act, but was entitled to recover the sum due as a simple debt.

7

The owners appealed by agreement of the other parties to the proceedings in relation to five questions of law which in one form or another raised the question whether the contract between themselves and OWBM was a contract for the sale of goods, and therefore subject to the Sale of Goods Act 1979, and if not, whether it was an implied term of the contract that OWBM would be able to pass title in the bunkers to them at the time when they were delivered or consumed.

8

OWBM and ING also appealed by agreement in relation to a number of questions of law, on which they sought to rely as providing an alternative basis for upholding the arbitrators' conclusion that they were entitled to recover payment from the owners. Since they share the same position in relation to the present appeal, it is convenient to refer to them both simply as OWBM.

9

The matter thus came before Males J., who affirmed the arbitrators' decision. He rejected the owners' argument that the contract was one for the sale of goods, holding that it was necessary to look behind the language of the contract to ascertain exactly what the parties had undertaken to do. He held that OWBM had not undertaken to transfer property in the bunkers delivered to the vessel because both parties had specifically envisaged that some, if not all of them, were likely to have been consumed in the vessel's engines before the time for payment had come. When that happened they ceased to exist and it became impossible to transfer property in them. He analysed the position as follows:

"46. In these circumstances the question arises, as already mentioned, what was the consideration for the money payment which the Owners agreed to make if it was not the transfer of title? In my judgment the true nature of the parties' bargain was that OWBM would deliver or arrange for delivery of the bunkers, which the Owners would be immediately entitled to use for the propulsion of the vessel."

10

In paragraph 55 of his judgment he expressly approved the arbitrators' reasoning in paragraph 51 of the award where they had said:

"51. Stripped of all unnecessary detail, the deal between the parties was that OWBM would ensure delivery of the bunkers, the use of which would be immediately available to the Owners, who would pay for them according to OWBM's invoice.

Such an agreement does quite obviously resemble in some respects a contract of sale, but its terms and their performance do not to any extent rely on property or title or their transfer."

11

In the light of his decision on the central issue concerning the nature of the contract the judge found it unnecessary to determine the other questions raised by OWBM. He gave the owners permission to appeal in relation to the questions raised by their appeal, but refused OWBM permission to appeal in relation to the questions raised by its appeal. In substance, therefore, the judge restricted the appeal to this court to the question whether the contract between the owners and OWBM was a contract for the sale of goods within the meaning of section 2 of the Sale of Goods Act 1979 and whether OWBM could sue for the price under section 49(1).

12

Shortly before the hearing of the appeal OWBM filed a respondent's notice seeking to uphold the judge's decision on a number of additional or different grounds. The owners argued that, having been refused permission to appeal in relation to the issues raised by its own appeal, OWBM was not entitled to raise the same points by way of a respondent's notice. We declined to resolve that question, because by the time the matter came on for hearing it had already become clear that there would not be time to hear argument on the wide range of issues that OWBM wished to pursue. At the outset of the hearing, therefore, we indicated that we would hear argument only on the question whether OWBM was bound to transfer title in the contract goods and would give our decision on that question before deciding on what, if any, further questions it would be appropriate to hear argument. Accordingly, this judgment deals only with the questions raised by the owners' appeal. The parties will have an opportunity in due course to make submissions about the future conduct of the appeal.

13

Before turning to consider the parties' submissions on the central question before us it may be helpful to refer in a little more detail to the commercial background and to the salient features of OWBM's standard terms. For the purposes of their interim award the arbitrators were asked to assume the existence of a number of facts. They included the...

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