Bunkers - Who Pays When The Charterer Doesn't?

Angara Maritime Ltd v Oceanconnect UK Ltd & another (The Fesco Angara) [2010] EWHC619(QB)

This case concerns a familiar situation in time charters. A bunker supplier provides bunkers to a time charterer, who has the job of ordering bunkers under the time charter. The time charterer does not pay. The bunker supplier looks to the shipowner to pay. The supplier relies on his retention of title clause, saying that the bunkers belong to him until he gets paid. In this situation, the shipowner is often left holding the baby - especially if the charterer disappears or goes bankrupt.

However, this is not always the case, as the Fesco Angara shows.

Facts

The Fesco Angara was time chartered to Britannia Bulkers. As time charterers, Britannia supplied the vessel with bunkers. They entered into a contract of sale with bunker suppliers, Oceanconnect. The sale contract contained a retention of title clause saying that the suppliers would retain ownership until they got paid.

Britannia did not pay for the bunkers, so they did not become the owners of the bunkers. They then ran into serious financial difficulties and eventually went into liquidation. They made early redelivery of several vessels - including FA. The charter required the shipowners to take over and pay Britannia for the quantity of bunkers remaining on board.

The shipowners refused to pay. Both parties made claims and the issues went to Judge Mackie in the High Court. The bunker suppliers argued that owners were liable to pay for the value of the bunkers because the vessel had consumed them during the time charter and also because after the charter was terminated, they assumed ownership when the charterers redelivered the vessel.

Mercantile Court decision

The shipowners won. The Court held that they had acquired ownership of the bunkers despite the retention of title clause. The judge decided that they took delivery of the bunkers in good faith and without notice of the charterers' non-payment. So, in accordance with section 25 (1) of the Sale of Goods Act 1979, they effectively became the owners of the bunkers.

This case is important, but it was decided on its facts. First, the judge accepted on oral evidence that owners really knew nothing about the terms of the bunker supply contract and of the charterers' non-payment. (Section 25 is very wide here - good faith without any notice of lien or anything else). Second, there was an agreed redelivery under the charter rather than a termination...