On 7 November 2014 OW Bunker A/S was made the subject of a bankruptcy order by the Probate Court in Aalborg, Denmark, and on 12 November 2014, its South African subsidiary, O W Bunkers South Africa(Pty) Ltd, applied for provisional liquidation that was subsequently confirmed. Since that time our International Trade and Transport department has received a number of enquiries regarding the rights of owners and/or charterers faced with competing claims by the liquidators of OW Bunkers and physical suppliers who had not been paid by OW Bunkers. Owners and Charterers faced the risk of having to pay twice for the same bunkers.
The OW Bunker Group's "Terms and Conditions of Sale for Marine Bunkers" provide for English law and London arbitration. A number of the suppliers, however, claimed the right to payment based on local law, which, in some cases, grants a maritime lien against the Vessel which they can enforce by arresting or detaining the Vessel.
On 14 July 2015, the Admiralty, Commercial and London Mercantile Court ruled, in the case of PST Energy Shipping and Product Shipping and Trading SA v. OW Bunker Malta and ING Bank SA (Res Cogitans), that OW Bunkers and their assignees ING Bank N.V. were entitled to payment for bunkers supplied, even in circumstances where OW Bunkers had not paid the physical supplier and accordingly could not pass property in the bunkers. The court found that the standard form bunker supply contracts are not contracts for the sale of goods within the scope of the Sale of Goods Act 1979 (“SOGA”). Section 2(1) of SOGA defines a contract of sale of goods as “a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price”.
The Court acknowledged that the contract between the parties was drafted as a contract of sale with many terms appropriate to such contracts (including terms for the passing of title in the bunkers),however, the Court concluded that an analysis of the obligations undertaken by the parties, and in particular the operation of the Retention of Title (“ROT”) clause, led to the conclusion that the bunker supplier had not undertaken an obligation to transfer property in the bunkers to the Owners, and thus the requirements of s2(1) of SOGA would never be satisfied.
The Court stated that the parties must have known it was likely that title in the bunkers would never be transferred from the Seller to the Buyer due to:
The ROT clause in the bunker supply contract;
The fact that some / all of the bunkers supplied were likely to be consumed before the expiry of the credit period (property in such bunkers would then cease to exist);
The permission given to the Buyer to consume the bunkers during such credit period; and
The period of credit given to the Buyer before payment falls due;
Owners of the RES COGITANS have applied for and been given permission to appeal the judgment on an expedited basis.
In terms of South African law, the decision of English courts in cases such as these will be applicable.
The court’s surprising decision carries many consequences for the maritime and other industries due to the fact that:
The vast majority of bunker supply contracts (as well as other contracts for maritime supplies) aresimilarly structured to the OW Bunker Terms & Conditions;
It raises an ownership issue /question where ships are bunkered by charterers prior to redelivery under time charters and such bunkers are to be sold by the charterers to the owners on redelivery and then sold on by the owners to their next charterers; and
Parties think they are entering into a sale and purchase contract, but the court is saying it is the same as a licence for the use the bunkers, meaning that the purchaser of bunkers does not have the statutory protection afforded to buyers under SOGA.
Although the decision may have direct application in South Africa its application will of course depend on the particular facts in each matter.