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PST Energy 7 Shipping & Product Shipping and Trading v OW Bunker Malta & ING Bank the Res Cognitans
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DMC/SandT/15/08
'''England'''
'''ARBITRATION ACT 1996 S.69 APPEAL: BUNKER SUPPLY CONTRACT ON CREDIT TERMS: RETENTION OF TITLE CLAUSE: PARTIES CONTEMPLATED BUNKERS WOULD LIKELY BE CONSUMED BEFORE PAYMENT MADE AND TITLE PASSED: WHETHER SALE OF GOODS ACT 1979 APPLICABLE: WHETHER REQUIREMENTS OF S.49 MET'''
'''Note: this judgment has now been confirmed by the Court of Appeal at [2015] EWCA Civ 1058: [[http://www.onlinedmc.co.uk/index.php/PST_Energy_7_Shipping_v_OW_Bunker_Malta_%26_ING_Bank_-_the_RES_COGITANS]] and by the Supreme Court [[http://www.onlinedmc.co.uk/index.php/PST_Energy_7_Shipping_v_OW_Bunker_Malta_-_The_Res_Cogitans]]
'''Summary'''
Owners argued, in defence, that as Sellers had not paid Rosneft, Rosneft retained property in the bunkers. Consequently Sellers had no property in the bunkers to pass to Owners. As a result, Owners argued:
1. The contract was not a contract of sale subject to the Act in as much as it did not fulfill fulfil either of the requirements of s.49 of the Act (Fn,2) for a claim for the price. (It was common ground that a claim for the price of goods sold must be brought under s.49.) S.49 required that either (a) Sellers pass property in the bunkers to Owners, or (b) the price claimed be “payable on a day certain irrespective of delivery”.
2. The Sellers had breached a term implied in contracts of sale under s.12 of the Act that they had the right to sell the goods or would have such a right at the date property was to pass.
(3) Whether this is the case is determined by reference to the situation at the time the contract in question was entered into.
(4) The (a) credit terms, (b) retention of title clause, (c) acknowledgment acknowledgement that the bunkers could be consumed before payment (in the OWB Terms), and (d) the likelihood that the bunkers might well be consumed before payment – all meant it was unlikely that property in the bunkers was intended to pass from Sellers to Owners in return for the price.
(5) Instead, what Owners were to pay for was an immediate right to consume the bunkers. The acknowledgment acknowledgement in the OWB Terms (which was read as express permission to consume the bunkers) was held to include not only permission from Sellers, but also confirmation that Sellers would be in a position to give such permission to Owners on behalf of other up-stream suppliers. That permission should also defend Owners against claims by up-stream suppliers.
(6) The up-stream suppliers (here, Rosneft) had given such permission. This was because Rosneft knew and accepted that the bunkers would be on-sold on terms allowing immediate consumption (without payment first).
Alternatively, Sellers argued that even if the contract were a contract of sale:
(1) They, as “buyer in possession” (the Act, s.25(1)(fn.3) ) could pass good title to the bunkers.
This was rejected. Delivery of goods by a “buyer in possession” does not pass title where the “buyer in possession” does not purport to pass title via that delivery.
(b) But even if the contract remains a “contract of sale”, a claim for the price may be maintained – via Section 49(2) of the Act - as payment being required a fixed period after delivery (on credit terms) was considered in the “Res Cogitans” (albeit obiter) as a price “payable on a day certain irrespective of delivery”.
Fn.1 The right to payment was assigned by OW Bunker Malta to ING Bank NV, and notice of assignment was duly given to the debtor. For the purposes of this note, OW Bunker Malta and ING Bank NV are one and the same.
