King Crude Carriers SA & Ors v Ridgebury November LLC & Ors (The “Ridgebury Alina L”, “Ridgebury Astari” and “Makronissos”) UK Supreme Court:

DMC/SandT/26/05

England

King Crude Carriers SA & Ors v Ridgebury November LLC & Ors (The “Ridgebury

Alina L”, “Ridgebury Astari” and “Makronissos”)

UK Supreme Court: Reed, Hodge, Hamblen, Burrows & Stephens SCJJ: [2025] UKSC 39: 12 November 2025

Judgment available on BAILII @ https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKSC/2025/39.html

Julian Kenny KC and Michael Hain (instructed by Wikborg Rein LLP) for the Sellers

Nigel Eaton KC and David Barnard (instructed by Reed Smith LLC) for the Buyers

SHIP SALE & PURCHASE: NON-FULFILMENT OF CONDITION: WHETHER BREACH OF A DEPOSIT PAYMENT OBLIGATION IN AN MOA (MEMORANDUM OF AGREEMENT) GIVES RISE TO A CLAIM IN DEBT OR DAMAGES: WHETHER THE RIGHT TO THE DEPOSIT UNDER AN MOA ACCRUES WHEN THE MOA IS ENTERED INTO OR ONLY ON THE DATE OF PAYMENT

DMC Rating: Developed

Summary

The Sellers had terminated contracts for the sale of three vessels (“MOAs”) following the Buyers’ wrongful failure to provide all necessary documentation to enable the deposit accounts to be opened and the consequent non-payment of the deposits.

On the assumed facts in the case, the market values of the vessels as at the date of termination were higher than the purchase price under the MOAs which meant that the Sellers had not suffered a loss and, consequently, a claim for damages did not arise.  

Therefore, in reliance on the Mackay v Dick principle (fn.1), the Sellers claimed in debt for the amount of the deposits which would otherwise have been payable under the MOAs if the Buyers had complied with their obligations. In the alternative, the Sellers argued that the right to the deposit accrued upon the MOAs being entered into and that the pre-conditions to the lodging of the deposit were pre-conditions as to timing of payment only.

In reversing the Court of Appeal’s decision, the UK Supreme Court held that the Mackay v Dick principle (part of Scots law) does not apply to English law, commenting that where a party wrongfully prevents the fulfilment of a condition which, if fulfilled, would have led to a claim in debt, that condition is not deemed to have been fulfilled under English law.

The Court also held that, absent express provisions in the MOAs to the contrary, there is no distinction between when a right to a sum accrues and when it is payable. The rights are concurrent and in circumstances where the MOAs specified a time of payment after the date of the MOAs, it was only on the specified payment date that the right to the deposit accrued.

Accordingly, the Court held that the Sellers’ claim lay in damages, not debt, and therefore the Sellers’ claim for the deposits failed.

Case Note contributed by Andrea Skeoch, Supporting Member of the LMAA, maritime arbitrator and International Contributor to DMC’s CaseNotes.

Background

The parties entered into contracts for the sale and purchase of three vessels on the amended Norwegian Saleform 2012. Clause 2 of the MOAs required the Buyers to lodge 10% of the purchase price in deposit accounts with a third-party deposit holder within 3 banking days of (i) the MOAs being entered into and (ii) the deposit holder confirming that the deposit accounts were opened. The Buyers were required to provide all necessary documentation to enable those accounts to be opened.

However, the Buyers did not provide the documentation. Consequently, the deposit accounts could not be opened nor could the deposits be paid into them. As a result, the Sellers terminated the MOAs under clause 13 and claimed the amount of the deposits as a debt. The advantage of claiming in debt was that the Sellers did not have to prove that they had suffered a loss as a consequence of the Buyers’ breach of contract.

In reliance on the principle in the House of Lords’ decision in the Scots law case of Mackay v Dick, the Sellers argued that the Buyers’ failure to provide the necessary documents was a breach of contract, that the relevant condition precedent to the opening of the deposit account and payment of the deposit was to be deemed fulfilled and that they could, in consequence, claim the deposit amounts in debt. In contrast, the Buyers contended that the Sellers’ sole remedy lay in damages and that the Sellers had suffered no loss because, on the assumed facts, the market price for each of the vessels was higher at the date of termination than the purchase price.  

The Sellers’ debt claim succeeded in arbitration, failed in the Commercial Court, but succeeded before the Court of Appeal. The Buyers appealed to the UK Supreme Court arguing that the Mackay v Dick principle did not form part of English law. The Sellers also put forward a secondary case arguing that, even if the Mackay v Dick principle did not apply, the deposits accrued due as a debt when the MOAs were entered into and that the contractual provisions related to actual payment of the deposits went only to the time of payment, so that the deposits could still be claimed as a debt.

Judgment

Principle in Mackay v Dick

The UK Supreme Court overturned the Court of Appeal’s decision and held that the principle of deemed fulfilment in Mackay v Dick does not form part of English law. Where a party wrongfully prevents the fulfilment of a condition which, if fulfilled, would have led to a claim in debt, that condition is not deemed to have been fulfilled under English law.

The Court held that the Mackay v Dick principle is reliant on a fiction. In reality, there was no performance. English law is based on the terms of a contract and their proper interpretation rather than a fictional fulfilment of a condition precedent.  

The Court held that the rejection of the principle does not lead to injustice. Where a condition precedent has not been fulfilled because of a breach of contract, the breach can be remedied in damages and there was no good reason to uphold a claim for debt if that involved disregarding the terms of the contract.

Whilst the Court recognised that, absent express provision to the contrary, there existed a presumption that it is not the intention of parties that either should be entitled to rely on their own breach to avoid the contract, bring it to an end or obtain a benefit from it, the Court  stated that there was no wider presumption that a party could not take advantage of its own wrong by – in this case – evidencing that its breach caused the Sellers no loss of money.

The Court held that the purpose of damages is to compensate the Sellers, not to punish the Buyers by ignoring the profits the Sellers had made by the Buyers’ breach. In so finding, the Court recognised that English contract law permits so-called “efficient breach”, i.e. allowing a party to profit from its own breach provided it is not relying on that breach to bring the contract to an end, or to found or invoke any right under the contract.

The Court also rejected the Sellers’ argument that terms should be implied into the MOAs such that the conditions precedent should be ignored on the basis that to do so would have involved re-writing the MOAs and would contradict clause 13, which expressly dealt with what was to happen if the deposit was not paid.  

Date of accrual of the right to the deposit

The Court also rejected the Sellers’ secondary argument, that the right to the deposit accrued as at the date of the MOA. The Court held that the contractual terms dealing with the setting up of the deposit accounts were conditions precedent to the accrual of the debt and did not merely go to the machinery of payment. The Court also held that the time at which the right to the deposit accrued and the time for payment of the deposit were concurrent. Here the debt had not accrued due as at the date of termination of the MOAs and, therefore, no claim in debt had arisen.

In this respect, the Court affirmed the Court of Appeal’s decision in The “Blankenstein” (fn.2).

Comment

The UK Supreme Court’s decision finally puts to rest the question of the applicability to English law of the Scots law Mackay v Dick deemed fulfilment principle. No such principle exists as a matter of English law, and so English law will not, in effect, apply a fiction in order to deem something to have been done which had not in fact been done.  

The Court upheld the principles of freedom of contract and made clear that the English courts will look to the terms of the contract (whether express or implied) and apply general principles of English law contractual interpretation to assess the nature of an innocent party’s remedy in the event of the other party’s wrongful failure to fulfil a condition precedent in the contract. When doing so, the English courts will be reluctant to imply terms into the contract which would, in effect, contradict or override the existing express terms of the contract.

Based on this decision and the terms of most standard MOA forms, absent expressly negotiated terms to the contrary, sellers will not be entitled to claim in debt for the deposit where the conditions precedent for the payment of the deposit set out in the MOA have not been met. Their sole remedy will be a claim in damages; this will, in turn, be dependent upon them showing that buyers’ breach had caused them to suffer a loss. This was the stumbling block on the facts of this case. The Sellers had not in fact suffered a loss, because the vessels’ value had increased, and so any savings made by the Buyers as a result of their own breach – namely non-payment of the deposits – were irrelevant to the assessment of loss.

If sellers wish to achieve an alternative result, it is open to them to include in the contract an express provision to that effect.  

It remains to be seen if sellers are able to negotiate terms in MOAs whereby the accrual of the right to receive the deposit applies as at the date of the MOA and/or the MOA expressly stipulates that sellers are entitled to the amount of the deposit if, in breach of the MOA, buyers fail to allow the deposit accounts to be opened. It is understood that the latest updated version of this popular ship sale and purchase form, namely Norwegian Saleform 2025, does not materially amend the wording to achieve the result desired by the Sellers in the present case.

However, on the Norwegian Saleform 2012 wording, one potential drafting solution would be to amend clause 2 by adding a new sentence after sub-paragraph (ii) to read “The Deposit shall be deemed earned as at the date of this Agreement and shall remain payable by Buyers to Sellers notwithstanding any failure by Buyers and/or the Deposit Holder to comply with sub-paragraphs (i) and (ii) of this Clause”.

This could be combined with an amendment to the first paragraph of Clause 13 to read as set out in fn.3 (the new wording is italicised).  

The case is also noteworthy because of its consideration of the extent of the presumption that a party cannot take advantage of its own wrong and the underlying purpose of damages for breach of contract.  

The Court‘s decision makes clear that whilst the presumption would prevent a party from relying on its own breach to terminate or get out of the contract or otherwise obtain a benefit from the contract, it does not extend so far as to prevent the wrongdoer from profiting from its breach in circumstances where they are merely defending a claim brought by the innocent party and not themselves bringing a claim or seeking a benefit under the contract.

An innocent party must, therefore, prove that the wrongdoer’s breach has caused it to suffer an actual loss and any benefit, profit or saving made by the party in breach because of that breach is irrelevant for the purpose of assessment of that loss.  

Footnote 1: (1881) 6 App Cas 251 (HL)

Footnote 2: [1985] 1 Lloyd’s Rep 9 (CA)

Footnote 3: “Should a deposit not be lodged in accordance with clause 2 (Deposit), the Sellers shall have the right to cancel this Agreement, and they shall be entitled to receive payment of the value of the deposit as a debt and, in addition, to claim compensation for their loss and for all expenses incurred together with interest.”