PST Energy 7 Shipping Llc Product Shipping and Trading SA v OW Bunker Malta Ltd and Others: CA 22 Oct 2015

The oil owners had contracted for its transport with OWBM aboard Res Cogitans under standard terms which would allow the captain to use the oil for navigation before transfer of the title in the oil. The court was now asked whether the agreement amounted to a sale governed by 1979 Act allowing for a claim for payment of the price under section 49(1).
Moore-Bick V-P said: ‘Whatever label one attaches to the contract (and I see nothing incongruous in describing it in commercial terms as a contract for the sale of goods), its essential nature is in my view reasonably clear. It is a contract under which goods are to be delivered to the owners as bailees with a licence to consume them for the propulsion of the vessel, coupled with an agreement to sell any quantity remaining at the date of payment, in return for a money consideration which in commercial terms can properly be described as the price. That may not satisfy the definition of a contract of sale of goods in section 2(1) of the 1979 Act, but there is no reason why the incidents of a contract of sale of goods for which the Act provides should not apply equally to such a contract at common law, save to the extent that they are inconsistent with the parties’ agreement. The difficulties in the present case stem entirely from the owners’ attempt to establish that the consideration for the payment of the price was the transfer of property in the whole of the goods to which the contract related, despite the fact that that does not correspond to the express terms of the contract relating to the use of the goods and the passing of title. The commercial background and the terms of the contract make it clear that what the owners contracted for was not the transfer of property in the whole of the bunkers, but the delivery of a quantity of bunkers which they had an immediate right to use but for which they would not have to pay until the period of credit expired. From the suppliers’ point of view the retention of title clause provided an ever diminishing degree of security for the payment of what was due to them. Since the contract provided for the transfer to the owners of property in any part of the bunkers remaining at the time of payment, it was to that extent a contract for the sale of goods to which the Act, including the implied condition in section 12, applied. A failure to pass title to any residue remaining at the time of payment would therefore involve a breach of contract, but it would not be one which entitled the owners to treat the contract as a whole as discharged, unless (contrary to all expectations) it represented such a large proportion of the quantity originally delivered that there could be said to have been a total failure of consideration.
For these reasons I agree with the judge that the transfer of property in the bunkers from OWBM to the owners was not the essential subject matter of the contract and that a failure to transfer property in the bunkers, all of which had been consumed when the period of credit expired, did not relieve the owners of the obligation to pay for them.’

Moore-Bick VP CA, Longmore, McCombe LJJ
[2015] EWCA Civ 1058, [2016] 1 All ER (Comm) 503, [2016] 2 WLR 1072, [2016] 1 Lloyd’s Rep 228, [2015] WLR(D) 426
Bailii, WLRD
Sale of Goods Act 1979 2 49(1)
England and Wales
At ComCPST Energy 7 Shipping Llc and Another v OW Bunker Malta Ltd and Another (Res Cogitans) ComC 14-Jul-2015
The OW Bunker Group had gone into insolvency. Purchasers from them were no concerned at the possibility, under the industry standard tersm, of having to pay twice.
Held: The owners’ appeal from the arbitration award failed.
The court . .
CitedArnold v Britton and Others SC 10-Jun-2015
Absurdity did not defeat a clear clause
A standard lease of plots on a caravan park, contained a provision which appeared to increase the rent by 10% in each year. The tenants argued that such a substantial increase could not have been intended.
Held: The tenants’ appeal failed . .
CitedClough Mill Ltd v Martin CA 1984
The plaintiff had supplied yarn to a company H on terms that the goods were to remain its property until paid for in full, although H was granted the power to sell the goods or use them for the purpose of manufacturing products. The terms also . .
CitedBorden (UK) Ltd v Scottish Timber Products Ltd CA 1979
The plaintiff sold a quantity of resin to the defendant for use in the manufacture of chipboard. The contract contained a reservation of title clause, but both parties contemplated that the resin would be used in the process of production before it . .

Cited by:
At CAPST Energy 7 Shipping Llc and Another v OW Bunker Malta Ltd and Another SC 11-May-2016
Parties had entered into a bunker supply contract which contained a retention of title clause in favour of the supplier. It purported to allow the buyer to use the goods before title came to be passed.
Held: The owner’s appeal failed. It did . .

Lists of cited by and citing cases may be incomplete.

Contract, Transport, Insolvency

Updated: 05 January 2022; Ref: scu.553685