The ruling issued this morning by the Supreme Court unanimously rejected the appeal presented by the shipowners of the 'res cogitans', PST Energy ( 'the shipowners') against OW Bunker Malta ( 'OWBM').
Wanting to briefly summarize the facts, October 31, 2014, the owners of the 'res cogitans' presented an order for the supply of fuel to OW Bunker Malta Ltd ( 'OWBM'), part of the OW Bunker Group. These, on the same date, sent order confirmation, specifying OWBM as a salesman, and by providing for the delivery date for the 2 or 4 November 2014.
The order specified that the payment would be made within 60 days from the delivery date of submission of the invoice OWBM and that the transaction would be subject to the terms and conditions of OW Bunker of 2013. The Bank ING proved the transferee of payment. OWBM had in turn placed a sub-order from the parent company, OW Bunker & Trading AS ( 'OWBAS') which, in turn, had placed at Rosneft Marine (UK) Limited ( 'RMUK'), which, in turn, he had placed at RN Bunker Ltd, the company that physically provided the fuel to ship in Tuapse, Black Sea, 4 November 2014.
The payment was made in respect of the latter company, but the chain broke off here, since RMUK not received payment from OWBAS, and OWBAS not received from OWBM. In November 2014, the OW Bunker Group, as noted, collapsed.
Shipowners deposited a complaint against OWBM and ING arguing that (i) all contracts of each chain contained the clause on the 'retention of title' (ie the reserve clause of the property on the goods by the seller, until the fulfillment of the payment of the contractually agreed price by the buyer) (ii) the fuel surcharge had not been made by OWBM, (iii) OWBM had never exercised the right of ownership on fuel, and (iv) therefore, that right would not be likewise, it never has been sent to the shipowners, and ship owners were not paying OWBM.
Arbitration - Appeal to the High Court
The initial arbitration ended in favor of OWBM, and the subsequent appeal to the High Court was rejected, since the court held that the effect of the clause on the 'retention of title' , combined with the imminent destruction of the fuel, he would have materially altered the nature of the contract, agreeing with the arbitration panel which that contract did not correspond to a contract of sale of goods. It corresponded, indeed, to a contract by which OWBM had to organize a fuel delivery to the ship owners, and to ensure that the real owner of the bunkers to allow their consumption, pending payment.
Decision of the Court of Appeal
The Court of Appeal accepted that the wording of the contract suggested a sale of goods, but considered that the terms of the contract (and in particular (i) the agreement relating to the claim within 60 days (ii) the transfer of ownership only when payment, and (iii) the right, in chief shipowners, to use the fuel for the propulsion of the ship from the time of its delivery) would indicate not a contract for the transfer of ownership in all of the fuel but on the contrary, a contract for delivery of the same chegli owners could immediately use and pay at the end of the credit period.
Although previous judgments had held that contracts bearing the clause of retention of title were within in the meaning of contracts for the sale of goods under the Sale of Goods Act 1979 (SOGA), even in cases where the buyer was given permission to use or dispose of the goods, these sentences were to be distinguished from the present case by the fact that none of them had considered the question of retroactive ownership when the goods have ceased to exist (ie, after the fuel consumption) .
The Appeal to the Supreme Court
The appeal, appealed in July 2015, was today rejected by the Supreme Court.
The following questions were referred to the Supreme Court:
- ? The agreement appeared to be a contract of sale of goods within the meaning of section 2 (1) of SOGA?
- ? If not, the contract would be subject to implied terms that OWB would have to meet its obligations in respect of its supplier, in particular through the timely payment of bunkers?
- ?La sentenza d’appello F G Wilson (Engineering) (NI) Ltd v John Holt & Co (Liverpool) Ltd  1 WLR 2365 (‘Caterpillar’) deve essere rigettata? In detta sentenza, la Corte d’Appello aveva stabilito che il venditore non potesse costringere al pagamento ai sensi della sezione 49(1) del SOGA, laddove il titolo di proprietà venisse riservato, in pendenza di pagamento.
The Court found that the SOGA section 49 (1) could not be interpreted as a complete code for those situations where the price could be recoverable, rejecting the ruling in the case of Caterpillar on that point, if necessary.
The Court also clarified that even where OWBM had been forced to transfer ownership of the bunkers were at the end of the credit period, the contract would have been unable to define a contract of sale of goods.
In other words, the decision of the Court of Appeal, that the SOGA would have applied to those bunkers were not consumed at the end of the credit period, it was not accepted.
As such, the claim by OWBM must be seen as a simple recovery of the credit, since the above-mentioned also a possibility to consume the fuel before the payment had been made from OWBM by physical suppliers, thereby enhancing the OWBM position and ING , which also he boasted a claim for damages.
In light of the Supreme Court decision, ship owners and charterers should consider carefully and prudently in the formulation of future fuel supply contracts in order to protect itself better if it were to arise such a default by an intermediate fuel supplier, and the related problems that might arise.
The next action before the Court could be related to the high level of interest claimed by ING / OWBM on fuel supplies unpaid.