PST Energy 7 Shipping LLC and Another (Claimants/Appellants) v O.W. Bunker Malta Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Neuberger,Lord Clarke,Lord Toulson,Lord Hughes,Lord Mance |
| Judgment Date | 11 May 2016 |
| Neutral Citation | [2016] UKSC 23 |
| Court | Supreme Court |
[2016] UKSC 23
Lord Neuberger, President
Lord Mance
Lord Clarke
Lord Hughes
Lord Toulson
Appellant
Jonathan Crow QC Stephen Cogley QC Julian Kenny QC Liisa Lahti
(Instructed by Ince & Co LLP)
Respondent
Robert Bright QC Marcus Mander Clara Benn
(Instructed by Allen & Overy LLP)
Heard on 22 and 23 March 2016
(with whom Lord Neuberger, Lord Clarke, Lord Hughes and Lord Toulson agree)
Despite the significance of her name in Cartesian philosophy, the vessel "Res Cogitans" depends on bunkers. The parties' submissions have in compensation lent a degree of metaphysical complexity to commonplace facts. We are told that many similar cases worldwide await our decision with interest.
The essential problem arises from the insolvency of the OW Bunker Group and the concerns of vessel owners that they may be exposed to paying twice over, once to their immediate bunker supply group now insolvent, and again to the ultimate source of the bunkers who may claim rights under a reservation of title or maritime lien. The concerns stem from what are understood to be fairly typical conditions on which bunkers are supplied worldwide.
The bunkers in this case were supplied to the vessel in the Russian port of Tuapse in the Black Sea on 4 November 2014. They were ordered on 31 October 2014 by the appellants, who are respectively owners and managers of the vessel and can be treated as one and referred to simply as the Owners. The immediate bunker supplier was the first respondent, OW Bunker Malta Ltd ("OWBM"), which obtained the bunkers under a contract with its parent company, OW Bunker & Trading A/S ("OWBAS"), another member of the OW Bunker Group, which was at the time the world's largest bunker supplier and is now insolvent. OWBAS in turn obtained them from Rosneft Marine (UK) Ltd ("RMUK"), which itself obtained them from an associate, RN-Bunker Ltd ("RNB"), which had facilities in Tuapse and made the actual delivery. On 6 November 2014, OWBAS announced that it was applying to the court in Aalborg for restructuring. The second respondent, ING Bank NV ("ING") financed the OW Bunker Group and claims as assignees of any claim which OWBM has against the Owners.
OWBM's supply contract with the Owners described itself as being for sale and delivery ex barge of 110 mt of gasoil at a price of USD 848 per mt and 1000 mt of fueloil at a price of USD 359 per mt (a total of USD 443,800), with "Payment within 60 days from date of delivery upon presentation of invoice". But it was expressly subject to the OW Bunker Group's general terms (said in OWBM's printed Sales Order Confirmation to be "well known to you" and to be published on OWBM's website).
The general terms start with the following "General Introduction":
"A.1 This is a statement of the terms and conditions according to which the International OW Bunker Group (hereinafter called 'OWB') will sell marine bunkers.
A.2 These conditions apply to all offers, quotations, orders, agreements, services and all subsequent contracts of whatever nature, except where otherwise is expressly agreed in writing by OWB."
Clause P.1 provides for the agreement to be governed by English law and for arbitration in London of all disputes arising in connection with it.
Clause G.12 under the heading Delivery provides:
"Delivery shall be deemed completed and all risk and liabilities, including loss, damage, deterioration, depreciation, contamination, evaporation or shrinkage to the Bunkers delivered and responsibility for loss, damage and harm caused by pollution or in any other manner to third parties shall pass to the Buyer from the time the Bunkers reach the flange/connecting pipe line(s)/delivery hoses provided by the Seller on the barge/tank truck/shore tank."
Clauses H.1 and H.2 provide in summary that "until full payment" of all amounts due to OWBM, title and property rights were reserved to OWBM and "the Buyer" was in possession of the bunkers "solely as Bailee for the Seller, and shall not be entitled to use the Bunkers other than for the propulsion of the Vessel". The full wording of clauses H.1 and H.2 is as follows:
"H.1 Title in and to the Bunkers delivered and/or property rights in and to such Bunkers shall remain vested in the Seller until full payment has been received by the Seller of all amounts due in connection with the respective delivery. …
H.2 Until full payment of the full amount due to the Seller has been made and subject to article G.14 hereof, the Buyer agreed [sic] that it is in possession of the Bunkers solely as Bailee for the Seller, and shall not be entitled to use the Bunkers other than for the propulsion of the Vessel, nor mix, blend, sell, encumber, pledge, alienate, or surrender the Bunkers to any third party or other Vessel."
The "Vessel" is defined by clause B.1 of the terms as meaning
"the Buyer's Vessel, Ship, Barge or Off-shore Unit that receives the supply/bunkers; either as end-user or as transfer unit to a third party."
It is unnecessary to consider whether the recognition in clause B.1 that the vessel might serve as a "transfer unit to a third party" fits with the prohibition in clause H.2 of sale, alienation or surrender of the bunkers to any third party or other vessel. That situation is not in question here. What is clear is that the Owners accepted that, until full payment to OWBM, they would not acquire title or property rights in the bunkers, but would hold them as bailees for OWBM, subject only to a right to use them for the propulsion of the vessel "Res Cogitans" herself.
OWBAS's purchase from RMUK priced the gasoil and fueloil at respectively USD 333 per mt and USD 830 per mt (a total of USD 416,000), and required "payment within 30 days from date of delivery against hard copy of invoice". The purchase was subject to RMUK's terms and conditions, clause 10 of which provided, inter alia:
"Until such time as payment is made, on behalf of themselves and the Vessel, the Buyer agrees that they are in possession of the Marine Fuels solely as Bailee for the Seller. If, prior to payment, the Seller's Marine Fuels are commingled with other Marine Fuels on board the Vessel, title to the Marine Fuels shall remain with the Seller corresponding to the quantity of the Marine Fuels delivered."
There was no express provision regarding consumption, but on the facts being assumed for the purposes of this case, RMUK was aware that the bunkers were being purchased for resale at a profit, that the OW Bunker Group's terms would be likely to include provisions to like effect to clauses H.1 and H.2 set out in para 6 above and that the bunkers were being purchased for immediate use and might be wholly or partly consumed within both the 30-day credit period allowed by RMUK and the 60-day credit period allowed by OWBM. Having contracted to supply the bunkers to OWBAS, RMUK then entered into a contract with RNB, under which RNB agreed to sell the bunkers to RMUK for delivery in accordance with the contract between RMUK and OWBAS.
On the assumed facts, the Owners availed themselves of the right to consume the bunkers in the vessel's propulsion — and did so both within and, quite probably after, the 30 and 60-day periods allowed for payment under the contracts between respectively RMUK and OWBAS and OWBM and the Owners. The bunkers were in the event totally consumed without any payment ever being made by OWBM or OWBAS to RMUK. RMUK on the other hand paid RNB in accordance with its contract with RNB on 18 November 2014. On the day before doing so, RMUK, having become aware that it might not receive payment from OWBAS, sent a "Demand of Payment" to the Owners, asserting that it remained the owner of the bunkers and requesting immediate payment from the Owners of USD 416,000, the amount which it had invoiced to OWBAS. The Supreme Court was given no indication that RMUK has since then taken any formal steps to pursue this claim against the Owners.
By the end of November 2014, the Owners had commenced arbitration proceedings claiming a declaration that they had no liability to pay OWBM and/or ING for the bunkers. The parties agreed to submit a raft of detailed preliminary issues to the arbitrators (David Farrington, Ian Kinnell QC and Bruce Harris), and for the purposes of such issues agreed a series of assumed facts. The arbitrators, after a four-day hearing, wrote an admirably analytical award dated 16 April 2015, giving their reasons for answers to each of such issues set out in its appendix 1 and holding inter alia that, on the assumed facts, OWBM/ING would be entitled to payment.
The parties having agreed that this award on preliminary issues should be the subject of appeals on both sides without leave pursuant to section 69(2)(a) of the Arbitration Act 1996, Flaux J gave directions accordingly on 8 May 2015, and the matter came on 7 to 9 July 2015 before Males J, who with notable speed produced his judgment on 14 July 2015. He dismissed the Owners' appeal, but went on, obiter, to express his opinion on an appeal by OWBM/ING, which would only have arisen for decision had the Owners' appeal succeeded. Males J then gave the Owners permission to appeal to the Court of Appeal, while refusing OWBM/ING permission to go to the Court of Appeal on their cross-appeal. The Court of Appeal (Moore- Bick V-P, Longmore and McCombe LJJ) on 22 October 2015 dismissed the Owners' appeal. The Supreme Court granted permission to appeal on 11 February 2016.
The arbitrators were evidently invited to treat the assumed facts as...
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