OW Reaches The Supreme Court

The bunker trade in particular has been keenly awaiting the decision of the Supreme Court in the "RES COGITANS" case (PST Energy 7 Shipping LLC and another -v- O W Bunker Malta Limited and another [2016] UKSC 23).

It has finally determined whether OW Bunkers receivers can successfully recover sums from ship owners for unpaid bunker supplies. The Supreme Court has confirmed that OW can recover. As readers will probably recall, this case focuses on whether a contract for the sale of bunkers subject to English law is a 'contract of sale of goods' within the meaning of the Sale of Goods Act 1979 (the Act). The fact that LMAA arbitrators, the High Court and the Court of Appeal in England and Wales have so far ruled that it is not, has caused a great deal of consternation for owners facing claims from both OW Bunkers and physical suppliers. But the arbitrators and the English Courts have clearly sought to avoid the strictures of the Act's technical requirements when a seller sues for the price, given the atypical nature of a bunker sale. Why is the standard bunker sale contract so different from most other sale contracts? In essence because the buyer is contractually permitted by the seller to use and consume the goods in part or in whole before the time for payment arises even though property in the goods remains with the seller until payment. Normally bunker sales are of small quantities of fuel which are burned before a 30 or 60 day credit period has elapsed. Retention of title (ROT) clauses combined with a licence to consume the goods prior to payment have produced circumstances which cannot have been envisaged by the drafters of the Act. A contract of sale is defined at s2(1) as 'a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price'. But in "RES COGITANS", title did not pass in the goods before they were consumed or at all. If nevertheless the standard bunker supply contract could fall within the Act's definition, where an unpaid seller of goods wants to bring a legal action for the price, the seller must satisfy one of two conditions in s49 of the Act. It is these requirements that have caused the arbitrators and the Courts significant concern. Either property in the goods has passed to the buyer and then if the buyer refuses to pay, the seller may bring an action for the price. Or, property in the goods has not passed to the buyer - which is the OW...