On 7 November 2014 OW Bunker A/S was made the
subject of a bankruptcy order by the Probate Court
in Aalborg, Denmark, and on 12 November 2014, its South African
subsidiary, O W Bunkers South Africa (Pty) Ltd,
applied for provisional liquidation that was
subsequently confirmed. Since that time the Freight,
Demurrage & Defence Department has handled a large number of
new claims from Members regarding demands from
inter alia individual suppliers of bunkers, all demanding
payment for the same bunker stems. Owner/Charterer Members
faced the risk of having to pay twice for the same
The OW Bunker Group 2013 "Terms and Conditions of
sale for Marine Bunkers" provide for English law and London
arbitration. A number of the suppliers, however,
claimed the right to payment on based on local law, which, in some
cases, grants a maritime lien-type status against the Vessel which
they can enforce by arresting or detaining the Vessel.
On 14 July 2015, the Admiralty, Commercial and London
Mercantile Court ruled, in the case of PST
Energy Shipping and Product Shipping and Trading SAv. OW Bunker Malta and ING Bank SA (Res
Cogitans),that OW and their
assignees ING Bank N.V. were entitled to payment for bunkers
supplied, even in circumstances where OW did not own property in
the bunkers. The court found that the standard form bunker
supply contracts are not contracts for the sale of goods within the
scope of the Sale of Goods Act 1979
("SOGA"). Section 2(1) of SOGA defines a
contract of sale of goods 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".
The Court acknowledged that the contract between the
parties was drafted as a contract of sale with many terms
appropriate to such contracts (including terms for the passing of
title in the bunkers), however, the Court
concluded that an analysis of the obligations undertaken by
the parties, and in particular the operation of the Retention of
Title ("ROT") clause, led to the conclusion that the
bunker supplier had not undertaken an obligation to transfer
property in the bunkers to the Owners, and thus the requirements of
s2(1) of SOGA would never be satisfied.
The Court stated that the parties must have known it was
likely that title in the bunkers would never be transferred from
the Seller to the Buyer due to:
The ROT clause in
the bunker supply contract;
The fact that some / all of the
bunkers supplied were likely to be consumed before the
expiry of the credit period (property in such bunkers
would then cease to exist);
The permission given to the
Buyer to consume the bunkers during such credit period;
The period of credit
given to the Buyer before payment falls due;
Owners of theRES COGITANS have applied for permission to appeal
the arbitration award.
In terms of South African law, the decision of English
courts subsequent to 1 November 1983 (Colonial Courts Act)
will be applicable insofar as they expound, with
retrospective effect, on existing law. Our courts
will, however, have regard to choice of law provisions in
contracts. Where the supply contract does not
stipulate the law to be applied (which is rare), then the proper
law of contract must be determined in accordance with the
applicable rules of private international law.
The court's surprising decision carries many
consequences for the maritime and other industries due to
the fact that:
The vast majority of bunker
supply contracts (as well as other contracts for maritime
supplies) are similarly structured to the OW
Bunker Terms & Conditions;
It raises an ownership issue
/question where ships are bunkered by charterers prior to
redelivery under time charters and such bunkers are to be
sold by the charterers to the owners on redelivery and then sold on
by the owners to their next charterers; and
Parties think they are entering into
a sale and purchase contract, but the court is saying it is
the same as a licence for the use the bunkers, meaning that the
purchaser of bunkers does not have the statutory protection
afforded to buyers under SOGA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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