Angara Maritime v Oceanconnect UK
Angara Maritime Ltd v Oceanconnect UK Ltd and Oceanconnect.com Inc (The “Fesco Angara”)
Queen’s Bench Division, London Mercantile Court: HHJ Mackie QC:  EWHC 619 (QB): 29 March 2010
SALE OF GOODS: BUNKERS/MARINE FUELS: S.25(1) OF THE SALE OF GOODS ACT 1979: SALE OF BUNKERS TO TIME CHARTERERS: BUNKERS DELIVERED TO VESSEL: FAILURE BY TIME CHARTERERS TO PAY SUPPLIERS FOR BUNKERS: RIGHT OF SUPPLIERS TO SUE OWNERS IN CONVERSION AND/OR BAILMENT FOLLOWING PREMATURE REDELIVERY OF VESSEL BY TIME CHARTERERS TO OWNERS
Available on BAILII @ http://www.bailii.org/ew/cases/EWHC/QB/2010/619.html
Yash Kulkarni (instructed by Thomas Cooper) for the Claimant/owners, Angara
Emma Hilliard (instructed by Chauncy & Co Solicitors) for the Defendants/bunker suppliers, Oceanconnect
Conversion: the effect of s.25(1) of the Sale of Goods Act 1979 was to exclude a claim by bunker suppliers against shipowners (where the suppliers had delivered bunkers to a vessel for the account of time charterers, who had subsequently failed to pay the suppliers) where there had been a voluntary act of delivery of the bunkers by time charterers to shipowners upon termination of the time charter and there had been nothing to put shipowners on enquiry as to the suppliers' rights.
Bailment: bunker suppliers (when supplying to a vessel for time charterers’ account) would be taken to have consented to a sub-bailment on the terms of the time charter and could not be placed in a better position that the time charterers. Owners were entitled to rely on the terms of the time charter, with the effect that there was no basis for a claim either during the period prior to or after redelivery.
Case note contributed by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Solicitor of England & Wales at Kennedys Singapore LLP and International Contributor to DMC’s CaseNotes
The case was predominantly about the application of s.25(1) of the Sale of Goods Act 1979, in circumstances where the unpaid bunker suppliers of time-charterers claimed against the owners of the vessel to which supplies had been delivered. Section 25(1) provides:
“Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods …, the delivery or transfer by that person, …, of the goods …, under any sale, … or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods … with the consent of the owner.”
The claimant, Angara, was the owner of the vessel “Fesco Angara”. The vessel was time- chartered to Britannia Bulkers A/S (“Britannia”). The timecharter provided, by clause 40, that:
“The Charterers on delivery, and the Owners on redelivery, shall take over and pay for all bunkers remaining on board the vessel…”
The defendants, Oceanconnect, were an English company engaged in the sale and supply of bunkers for shipping and also for its US parent company. Oceanconnect had contracted with Britannia and delivered to the vessel US$177,305.59 worth of bunkers. Notably, the Oceanconnect contract included a retention of title clause, which reserved the legal title in the bunkers to Oceanconnect until payment for the bunkers was received.
Britannia later gave notice to Angara that they were unable to continue with the time charter due to the withdrawal of support by their financiers, so had no choice but to prematurely redeliver the vessel. Angara accordingly issued a redelivery notice to Britannia, which indicated that the outstanding indebtedness of Britannia to Angara was US$197,127.25. Britannia subsequently did not pay Angara or Oceanconnect and later went into administration.
Oceanconnect then arrested the vessel in Amsterdam, whereupon Angara entered into an escrow agreement with Oceanconnect for the release of the vessel. Following the escrow agreement being reached, Angara commenced proceedings in England for a declaration of non-liability as regards bunkers to the value of US$177,305.59. In response, Oceanconnect counterclaimed for damages for conversion in the same amount.
Section 25 of the Sale of Goods Act 1979
The judge identified that “the evaluation of the claim under Section 25 is most usefully conducted by the sequence of steps adopted by Clarke J in Forsythe International (UK) Limited v Silver Shipping Co Limited and Others  lWLR 1334 - The” Saetta””
The judge then set out the steps and slightly adapted them to the facts of the present case, as follows:
“Step 1 - Did the persons who bought or agreed to buy the goods, that is the charterers, obtain possession of the goods with the consent of the seller?
Step 2 - Was there delivery, within the meaning of Section 25, of the bunkers by the charterers to the owners?
Step 3 - Did the owners receive the bunkers in good faith and without notice of any lien or other right of the original seller in respect of the goods?
This is in reality two steps because the owners must establish both that they received the bunkers in good faith and also that they did so without the relevant notice.
Step 4 – If the first three steps are satisfied by the owners what is the meaning of the last part of Section 25(1) "as the same effect as if the person making the delivery ... were a mercantile agent in possession of the goods ... with the consent of the owner". In Forsythe, Clarke J] held that if there was a delivery by the charterers to the owners pursuant to a sale, the charterers were acting in the ordinary course of their business as charterers and were doing something (namely delivering goods pursuant to a sale) which would constitute acting in the ordinary course of business if they were mercantile agents.”
In relation to step one, Oceanconnect did not dispute that Britannia had obtained possession of the bunkers with the consent of Oceanconnect, as the bunkers were received by the vessel on behalf of Britannia.
In relation to step two, the position of Oceanconnect was that clause 40 could not apply to a premature termination (citing the House of Lords decision in Stellar Chartering & Brokerage Inc. v Efibanca-Ente Finanziario Interbancario S.p.A. The Span Terza  1 W.L.R 27 in support), so that there had been no voluntary delivery of the bunkers between Britannia and Angara. Angara’s position was that there had been a contractual redelivery of the vessel, and thus a sale of the bunkers, and that consideration of clause 40 and The Span Terza was a distraction because that case was about who owned bunkers at the point of sale in a dispute between suppliers and time charterers.
The judge preferred the position of Angara, and stated: “The issue is whether as a matter of fact there was a voluntary act by the buyers in possession [i.e. Britannia] amounting to delivery and, on the evidence, there clearly was… Such documents as exist are consistent with there being a sale by Britannia to Angara.”
In relation to step three, Oceanconnect claimed that Angara lacked good faith and/or had notice of their rights, on the basis that in some circumstances mere negligence or carelessness might be evidence of bad faith and that suspicion combined with the power to acquire knowledge could amount to notice. Angara submitted that it had no knowledge of Oceanconnect’s standard terms or that there was a retention of title clause within them. Angara further submitted that it was not aware that Britannia had not paid for the bunkers.
On the evidence given, by the head of the fleet department of Angara’s ship managers, the judge was satisfied that Angara had made out its submissions and that there had been no evidence of negligence or suspicion by Angara.
In relation to step four, the judge considered that this step had already been satisfied for the reasons already given.
The judge, therefore, concluded: “As Angara purchased bunkers from Britannia upon redelivery in good faith and without notice of any adverse right, what would otherwise be a good claim in conversion fails.”
Oceanconnect’s position was that upon delivery of the bunkers to the vessel, Angara became bailee. Oceanconnect argued that Angara breached its duties as bailee by consuming the bunkers, which amounted to a conversion, and Angara therefore had no defence, even under s.25(1) of the Sale of Goods Act 1979, in the period up to redelivery.
Angara’s position was that on delivery to the vessel Britannia held the bunkers as bailee, that Angara were sub-bailee and that there had been a sub-bailment on the terms of the time charter between Britannia and Angara, under which Britannia was obliged to provide and pay for the bunkers. Angara also submitted that Oceanconnect would also be taken as having consented to Britannia sub-bailing the bunkers on the terms of the time charter (on the basis of the Privy Council decision in The Pioneer Container  2 AC 324).
The judge stated: “Although Angara was a bailee, the relationship is a classic illustration of a sub-bailment on terms. In a claim based on bailment, Oceanconnect could not be in any better position than that which Britannia would have enjoyed. There is thus no basis for Oceanconnect's bailment claim either during the period prior to redelivery or afterwards.”
It followed that the claim for a declaration was made out and the counterclaims would be dismissed.
While the result in this case is, at first sight, good news for the claimant, this is not the end of the story.
The defendants had further arrested the vessel in the United States and then sought to pursue their claim there, as United States law favours marine suppliers against owners, even where the supplies were ordered by and for the account of the time charterers.
The Court of Appeal recently allowed an appeal by the defendants (see Oceanconnect UK Ltd & anr. v Angara Maritime Ltd  EWCA Civ 1050, 12 October 2010) against the maintenance of an anti-suit injunction taken out by the claimant, which had prohibited the defendants from pursuing proceedings in other jurisdictions.
On reviewing that appeal, it is evident that owners need to take steps to exclude such a possibility when agreeing the terms on which security is to be provided. This follows from the Court of Appeal indicating that the anti-suit injunction would have been maintained had the defendants’ action in the United States been contrary to the terms of the escrow agreement.