PST Energy 7 Shipping LLC and anr (Appellants) v O W Bunker Malta Ltd and anr (Respondents)

Mon, 16 May, 2016

[2016] UKSC 23. On appeal from [2015] EWCA Civ 1058


Stephen Cogley QC and Liisa Lahti appeared for the Appellants in the Supreme Court who handed down judgment this week in the much-anticipated RES COGITANS dispute arising out of the insolvency of OW Bunker. 

The decision is one of the most significant cases on the Sale of Goods Act in many years.

The judgment concerns whether a contract for the supply of bunkers by a subsidiary of the now insolvent OW Bunker was a contract to which the Sale of Goods Act 1979 applies.

The Supreme court affirmed the decision of the Court of Appeal and the first instance Judge Males J that a contract for the supply of bunkers is not a contract to which the Sale of Goods Act 1979 applies.

According to the Supreme Court the It was a sui generis agreement, with two aspects:  The OW subsidiary must (a) permit consumption prior to any payment and without any property ever passing in the bunkers consumed, and (b) if and so far as bunkers remained unconsumed, to transfer the property in the bunkers remaining to the shipowner in return for the shipowners paying the price for all of the bunkers, whether consumed before or remaining at the time of payment. 

The practical effect of this is that, in many cases and at least insofar as English law is concerned, OW Bunker subsidiaries are entitled to sue for contract debt and shipowners may be liable to pay twice for the bunkers that they procured.

The Supreme Court further considered whether s. 49(2) of the Sale of Goods Act contained an exhaustive list of circumstances in which a seller could claim the price for goods. Lord Mance stated that a court should be cautious about recognising claims to the price of goods in cases not falling within s. 49.  However there was at least some room for claims for the price in circumstances not covered by section 49. Lord Mance declined to set the precise limits for the circumstances in which the price may be recoverable outside s. 49.