Easter
Term
[2016] UKSC 23
On appeal from: [2015] EWCA Civ 1058
JUDGMENT
PST Energy 7 Shipping LLC and another (Appellants) v
O W Bunker Malta Limited and another (Respondents)
before
Lord Neuberger, President
Lord Mance
Lord Clarke
Lord Hughes
Lord Toulson
JUDGMENT GIVEN ON
11 May 2016
Heard on 22 and 23 March
2016
|
Appellants
Jonathan Crow QC
Stephen Cogley QC
Julian Kenny QC
Liisa Lahti
(Instructed by Ince
& Co LLP)
|
|
Respondents
Robert Bright QC
Marcus Mander
Clara Benn
(Instructed by
Allen & Overy LLP)
|
LORD MANCE: (with whom Lord
Neuberger, Lord Clarke, Lord Hughes and Lord Toulson agree)
Introduction
1.
Despite the significance of her name in Cartesian philosophy, the vessel
“Res Cogitans” depends on bunkers. The parties’ submissions have in
compensation lent a degree of metaphysical complexity to commonplace facts. We
are told that many similar cases worldwide await our decision with interest.
2.
The essential problem arises from the insolvency of the OW Bunker Group
and the concerns of vessel owners that they may be exposed to paying twice
over, once to their immediate bunker supply group now insolvent, and again to
the ultimate source of the bunkers who may claim rights under a reservation of
title or maritime lien. The concerns stem from what are understood to be fairly
typical conditions on which bunkers are supplied worldwide.
3.
The bunkers in this case were supplied to the vessel in the Russian port
of Tuapse in the Black Sea on 4 November 2014. They were ordered on 31 October
2014 by the appellants, who are respectively owners and managers of the vessel
and can be treated as one and referred to simply as the Owners. The immediate
bunker supplier was the first respondent, OW Bunker Malta Ltd (“OWBM”), which
obtained the bunkers under a contract with its parent company, OW Bunker &
Trading A/S (“OWBAS”), another member of the OW Bunker Group, which was at the
time the world’s largest bunker supplier and is now insolvent. OWBAS in turn obtained
them from Rosneft Marine (UK) Ltd (“RMUK”), which itself obtained them from an
associate, RN-Bunker Ltd (“RNB”), which had facilities in Tuapse and made the
actual delivery. On 6 November 2014, OWBAS announced that it was applying to
the court in Aalborg for restructuring. The second respondent, ING Bank NV
(“ING”) financed the OW Bunker Group and claims as assignees of any claim which
OWBM has against the Owners.
OWBM’s contract with the Owners
4.
OWBM’s supply contract with the Owners described itself as being for
sale and delivery ex barge of 110 mt of gasoil at a price of USD 848 per mt and
1000 mt of fueloil at a price of USD 359 per mt (a total of USD 443,800), with
“Payment within 60 days from date of delivery upon presentation of invoice”.
But it was expressly subject to the OW Bunker Group’s general terms (said in
OWBM’s printed Sales Order Confirmation to be “well known to you” and to be
published on OWBM’s website).
5.
The general terms start with the following “General Introduction”:
“A.1 This is a statement of the
terms and conditions according to which the International OW Bunker Group
(hereinafter called ‘OWB’) will sell marine bunkers.
A.2 These conditions apply to
all offers, quotations, orders, agreements, services and all subsequent
contracts of whatever nature, except where otherwise is expressly agreed in
writing by OWB.”
Clause P.1 provides for the agreement to be governed by
English law and for arbitration in London of all disputes arising in connection
with it.
6.
Clause G.12 under the heading Delivery provides:
“Delivery shall be deemed completed and all risk and
liabilities, including loss, damage, deterioration, depreciation,
contamination, evaporation or shrinkage to the Bunkers delivered and
responsibility for loss, damage and harm caused by pollution or in any other
manner to third parties shall pass to the Buyer from the time the Bunkers reach
the flange/connecting pipe line(s)/delivery hoses provided by the Seller on the
barge/tank truck/shore tank.”
Clauses H.1 and H.2 provide in summary that “until full
payment” of all amounts due to OWBM, title and property rights were reserved to
OWBM and “the Buyer” was in possession of the bunkers “solely as Bailee for the
Seller, and shall not be entitled to use the Bunkers other than for the
propulsion of the Vessel”. The full wording of clauses H.1 and H.2 is as
follows:
“H.1 Title in and to the
Bunkers delivered and/or property rights in and to such Bunkers shall remain
vested in the Seller until full payment has been received by the Seller of all
amounts due in connection with the respective delivery. …
H.2 Until full payment of the
full amount due to the Seller has been made and subject to article G.14 hereof,
the Buyer agreed [sic] that it is in possession of the Bunkers solely as Bailee
for the Seller, and shall not be entitled to use the Bunkers other than for the
propulsion of the Vessel, nor mix, blend, sell, encumber, pledge, alienate, or
surrender the Bunkers to any third party or other Vessel.”
The “Vessel” is defined by clause B.1 of the terms as
meaning
“the Buyer’s Vessel, Ship, Barge
or Off-shore Unit that receives the supply/bunkers; either as end-user or as
transfer unit to a third party.”
7.
It is unnecessary to consider whether the recognition in clause B.1 that
the vessel might serve as a “transfer unit to a third party” fits with the
prohibition in clause H.2 of sale, alienation or surrender of the bunkers to
any third party or other vessel. That situation is not in question here. What
is clear is that the Owners accepted that, until full payment to OWBM, they
would not acquire title or property rights in the bunkers, but would hold them
as bailees for OWBM, subject only to a right to use them for the propulsion of
the vessel “Res Cogitans” herself.
RMUK’s contract with OWBAS
8.
OWBAS’s purchase from RMUK priced the gasoil and fueloil at respectively
USD 333 per mt and USD 830 per mt (a total of USD 416,000), and required
“payment within 30 days from date of delivery against hard copy of invoice”.
The purchase was subject to RMUK’s terms and conditions, clause 10 of which
provided, inter alia:
“Until such time as payment is
made, on behalf of themselves and the Vessel, the Buyer agrees that they are in
possession of the Marine Fuels solely as Bailee for the Seller. If, prior to
payment, the Seller’s Marine Fuels are commingled with other Marine Fuels on
board the Vessel, title to the Marine Fuels shall remain with the Seller
corresponding to the quantity of the Marine Fuels delivered.”
There was no express provision regarding consumption, but
on the facts being assumed for the purposes of this case, RMUK was aware that
the bunkers were being purchased for resale at a profit, that the OW Bunker
Group’s terms would be likely to include provisions to like effect to clauses
H.1 and H.2 set out in para 6 above and that the bunkers were being purchased
for immediate use and might be wholly or partly consumed within both the 30-day
credit period allowed by RMUK and the 60-day credit period allowed by OWBM.
Having contracted to supply the bunkers to OWBAS, RMUK then entered into a
contract with RNB, under which RNB agreed to sell the bunkers to RMUK for
delivery in accordance with the contract between RMUK and OWBAS.
The assumed facts
9.
On the assumed facts, the Owners availed themselves of the right to
consume the bunkers in the vessel’s propulsion - and did so both within and,
quite probably after, the 30 and 60-day periods allowed for payment under the
contracts between respectively RMUK and OWBAS and OWBM and the Owners. The
bunkers were in the event totally consumed without any payment ever being made
by OWBM or OWBAS to RMUK. RMUK on the other hand paid RNB in accordance with
its contract with RNB on 18 November 2014. On the day before doing so, RMUK, having
become aware that it might not receive payment from OWBAS, sent a “Demand of
Payment” to the Owners, asserting that it remained the owner of the bunkers and
requesting immediate payment from the Owners of USD 416,000, the amount which
it had invoiced to OWBAS. The Supreme Court was given no indication that RMUK
has since then taken any formal steps to pursue this claim against the Owners.
The proceedings to date
10.
By the end of November 2014, the Owners had commenced arbitration
proceedings claiming a declaration that they had no liability to pay OWBM
and/or ING for the bunkers. The parties agreed to submit a raft of detailed
preliminary issues to the arbitrators (David Farrington, Ian Kinnell QC and
Bruce Harris), and for the purposes of such issues agreed a series of assumed
facts. The arbitrators, after a four-day hearing, wrote an admirably analytical
award dated 16 April 2015, giving their reasons for answers to each of such
issues set out in its appendix 1 and holding inter alia that, on the assumed facts,
OWBM/ING would be entitled to payment.
11.
The parties having agreed that this award on preliminary issues should
be the subject of appeals on both sides without leave pursuant to section
69(2)(a) of the Arbitration Act 1996, Flaux J gave directions accordingly on 8
May 2015, and the matter came on 7 to 9 July 2015 before Males J, who with
notable speed produced his judgment on 14 July 2015. He dismissed the Owners’
appeal, but went on, obiter, to express his opinion on an appeal by OWBM/ING,
which would only have arisen for decision had the Owners’ appeal succeeded.
Males J then gave the Owners permission to appeal to the Court of Appeal, while
refusing OWBM/ING permission to go to the Court of Appeal on their
cross-appeal. The Court of Appeal (Moore-Bick V-P, Longmore and McCombe LJJ) on
22 October 2015 dismissed the Owners’ appeal. The Supreme Court granted
permission to appeal on 11 February 2016.
The issues and the award in more detail
12.
The arbitrators were evidently invited to treat the assumed facts as
accepting that all the bunkers were used within the 60-day credit period
allowed by OWBM to the Owners (see para 42 and footnote 18 to their award). But
their reasoning was wide enough to cover what the Supreme Court has been told
may be the actual position, which is that at most that part of the bunkers were
so used, with any remainder being used later. Addressing OWBM’s cross-claim for
the price, the arbitrators noted that section 2(1) of the Sale of Goods Act 1979
provides that:
“A contract of sale of goods is 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.”
Further, section 49 provides
that:
“(1) Where, under a contract
of sale, the property in the goods has passed to the buyer and he wrongfully
neglects or refuses to pay for the goods according to the terms of the
contract, the seller may maintain an action against him for the price of the
goods.
(2) Where, under a contract
of sale, the price is payable on a day certain irrespective of delivery and the
buyer wrongfully neglects or refuses to pay such price, the seller may maintain
an action for the price, although the property in the goods has not passed and
the goods have not been appropriated to the contract.”
The arbitrators noted in footnote 7 to para 31 of their
award that, if the contract was one of sale, then, according to authority
binding on them, section 49(1) precluded recovery of the price of goods in
circumstances where the property in goods had not passed to the buyer.
13.
The authority to which they were referring is F G Wilson
(Engineering) Ltd v John Holt & Co (Liverpool) Ltd (often referred to
as “Caterpillar”) [2014] 1 WLR 2365. This is an authority the
correctness of which OWBM/ING would, if necessary, wish to challenge in the
Supreme Court on this appeal. It is in dispute whether it is open to them to do
so, in the light of the issues as addressed to and answered by the arbitrators
as well as in the light of Males J’s refusal of permission to OWBM/ING to
cross-appeal from his judgment to the Court of Appeal. Because of this dispute,
it will be necessary to give an account of the arbitrators’ reasoning, award
and answers to the preliminary issues which is fuller than it would otherwise
have been.
14.
Having rejected section 49(1) as a basis for recovery of the price, the
arbitrators considered and rejected three other ways in which OWBM suggested
that it could recover the price of the bunkers if treated as sold within the
Sale of Goods Act: (i) under section 49(2), as being “payable on a day certain
irrespective of delivery”; (ii) under section 50, as damages for
non-acceptance; and (iii) on the basis that property passed for or in a
nanosecond, as and when the bunkers went up in smoke. These being points raised
by OWBM’s cross-claim, for which permission to appeal was refused by Males J,
none of them is before the Supreme Court.
15.
Taking stock, the arbitrators considered that they could now answer
certain of the agreed preliminary issues. They could answer issues 1, 2 and 3
to the effect that, on the assumed facts, OWBM never had property in the
bunkers at any material time, and that the retention of title clause in its
terms (in any event) prevented property passing to the Owners. On that basis,
issue 4 then required the arbitrators to determine
“what is the consequence in
respect of any claim that OWBM may seek to assert:
(a) for the price under
section 49 or section 50 of SOGA 1979; or
(b) otherwise under the
Contract; or
(c) in bailment; or
(d) in restitution; or
(e) in tort?”
They held that they could answer issue 4(a) to the effect
that “No such claim could succeed”, and issue 8, asking whether section 49(2)
applied, with a simple “No”.
16.
On that basis, the arbitrators said (para 45) that it was now convenient
to turn attention to issue 4(b). This, they said,
“concerns the possibility that
[OWBM/ING] have a contractual claim falling outside constraints of [the Sale of
Goods Act], and involves looking again at the contractual relationships between
the parties, and in particular at that between OWBM and the Owners.”
In answering this issue, the arbitrators said (para 46):
“If, as we believe we must, we
accept that section 49 of SOGA rules out the possibility of a claim against the
Owners for the price of the bunkers supplied to the Vessel, and, as seems more
obviously the case, that section 50 offers no alternative, does this also rule
out the possibility of there being some other contractual remedy against the
Owners arising out of their failure to pay OWBM’s invoice? The Owners have
suggested that the answer to this question is ‘Yes’. We do not agree. Whether
or not one chooses to describe the contract between these two parties as a ‘hybrid
contract’ is, we consider, probably neither here nor there (although we would
prefer to describe it - and no doubt others like it - as sui generis), but to
suggest that the remedies that may follow from the failure to comply with its
terms are solely and irrevocably those within the gift of SOGA appears to us to
be unacceptable and quite unreal.”
17.
In the next para (para 47), they continued:
“If all had gone in accordance
with the parties’ expectations (and, of course, the Owners had had previous
dealings with OWB Group companies), the Owners would have paid OWBM’s invoice
within the 60-days credit period. We are quite confident, that, when they did
so, it would not have crossed anyone’s mind to enquire what bunkers had been
consumed meanwhile in order to determine whether the invoice was being paid
wholly or in part under a contract of sale (in respect of unconsumed bunkers),
or otherwise (in respect of consumed bunkers). Regardless of the situation on
board the Vessel, both parties would in our opinion understand that payment was
being made simply in accordance with the express terms of the contract, which
would have been the case. There is in our view no challenge to the provisions
of SOGA or their effect in reaching the conclusion that we have unhesitatingly
reached that, on the assumed facts, once the 60-days period of credit had
elapsed the Owners were in breach of contract, the remedy for which was a claim
in debt. We have seen nothing in the authorities to suggest that this simple
and straightforward conclusion is incorrect.”
18.
The arbitrators concluded that this reasoning enabled them to answer
issues 4(b) and 6(a). Issue 6(a) was whether “to the extent not resolved by the
determination of issue 4” OWBM/ING had a claim under the contract. However,
they added “we have to say that we find the relationship (if any) between
issues 4 and 6 somewhat unclear” (para 48). They went on to say that “we
believe that we can at this point also tackle issue 9”. Before doing so they addressed
issue 5, rejecting OWBM’s case that their supply to the Owners contained
various implied terms, now no longer relied on. Turning to issue 9, this asks:
“Did [the Sale of Goods Act] apply
to the Contract between the Owners/OWBM in any event and if not what is the
effect on the parties’ respective claims?”
The arbitrators gave the straightforward answer: “No, and
none”.
19.
In the light of this answer, the arbitrators concluded that they could deal
shortly with issues 10 to 13, saying (para 53):
“As to Issue 10, OWBM was not
required to own or to have property in the bunkers at the time of delivery
because the contract between OWBM and the Owners did not require this. There
was no ‘modification’ of the requirements of SOGA because SOGA did not apply
and its terms were not engaged. As to Issue 11, there was no such requirement.
As to Issue 12, no terms were implied into the contract by virtue of section 12
of SOGA. And, finally, as to Issue 13, in so far as there were no such implied
terms as suggested, there were none to be breached. It is unclear what, if any,
other breaches of contract by OWBM are alleged, but none appears to have been
established.”
20.
Issues 10 to 13 and the answers given read as follows:
“10. Do the OWBM T&Cs, on
a true and proper construction, modify the requirements of section 12 of SOGA
1979 such that OWBM was required to own or have property in the Bunkers at the
point of delivery?
ANSWER: The OWBM T&Cs did
not modify section 12 of SOGA 1979, but, under the Contract between the Owners
and OWBM, OWBM was not required to own or have property in the Bunkers at the
point of delivery, and section 12 did not apply.
11. If not, what is the
requirement imposed by the Contract, on a true and proper construction,
regarding the title OWBM is required to pass to the Owners?
ANSWER: There was no such
requirement.
12. What terms were implied
into the Contract by virtue of section 12 SOGA?
ANSWER: None, because section
12 did not apply.
13. Is OWBM in breach of
Contract, and in particular the implied terms referred to at Issue 12 above (or
any of them) and if so in what way?
ANSWER: As there were no terms
implied into the Contract by virtue of section 12 SOGA, there were none to be
breached. No other breaches were specified, and on the basis of the Assumed
Facts, none appears to have been established.”
The proceedings in court in more detail
21.
Males J in dismissing the Owners’ appeal held that OWBM’s contract to
supply bunkers to the Owners was not a contract to which the Sale of Goods Act
applied, but was a contract containing a condition whereby OWBM undertook that
the Owners would have the lawful right to use any bunkers which they in fact
used pursuant to the liberty they were given by its terms (paras 48 and 52). He
held that it was not subject to any further condition as regards the passing of
property in any bunkers used. OWBM/ING’s cross-appeal, to recover the price
under section 49 of an equivalent sum by way of damages, did not on this basis
arise, but Males J nonetheless expressed some views on it, obiter. He thought
(paras 66 and 74) that if the Act applied, that could only be because OWBM
undertook, in the terms of section 2(1), “to transfer the property in goods to
the buyer”, that it had failed to do so and was therefore (subject to two now
immaterial arguments) in breach of the implied term contained in section 12(1),
and that that would represent a total failure of consideration which, applying Rowland
v Divall [1923] 2 KB 500, would provide the Owners with a defence to a
claim for the price. Apart from this problem, he said that he would, however,
have disagreed with the arbitrators on one point relating to the cross-claim,
in that in his view the credit terms would have satisfied the language of
section 49(2). Having expressed these views, he refused permission, as already
stated, in respect of the Owners’ cross-appeal.
22.
The issues argued before the Court of Appeal were thus effectively
limited to two: (1) Was the contract a contract of sale within the meaning of
section 2(1) of the Sale of Goods Act? (2) If not, was it subject to any
implied term that OWBM would perform or had performed its obligations to its
supplier, in particular by paying for the bunkers timeously? Like the judge,
the Court of Appeal was bound by the Caterpillar decision, so that it
could have done no more than hold that section 49 of the Sale of Goods Act
barred any claim to the price by OWBM if the contract was subject to the Act,
even if that point was open and had arisen, for consideration.
23.
The Court of Appeal agreed substantially with the judge in answering the
two main questions before it in OWBM/ING’s favour. However, as appears from the
following key passage in its reasoning, it also contemplated that the contract
would or might be a contract of sale pro tanto to the extent that payment was
made at a time when any part of the bunkers remained unconsumed. Moore-Bick
V-P, giving the main judgment, with which the other members of the court
agreed, said:
“33. … 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.
34. 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.”
The issues before the Supreme Court
24.
The issues on the Owners’ appeal to the Supreme Court remain as argued
before the Court of Appeal and set out in para 22 above. But, in seeking to
uphold the decisions of the courts below, Mr Robert Bright QC for OWBM/ING
submits that it is open to OWBM/ING to rely on a point which was not open to
his clients in those courts. That is that the decision of the Court of Appeal
in the Caterpillar case, mentioned in para 13 above, was wrong and
should be overruled. The correct position is, he submits, that, even though a
contract is categorised as one of sale within the Sale of Goods Act, section 49
should not be read as excluding all possibility of claims to the price of goods
sold, if the contract so provides, even though the circumstances cannot be
brought within either of subsections (1) and (2). Whether this submission is
open to OWBM/ING is, as I have stated in para 13 above, in dispute.
25.
For the Owners, Mr Jonathan Crow QC makes five basic, though
over-lapping, submissions about the nature of the contract. This, he submits,
is a matter of substance, not form. Second, it must be determined at the date
when the contract is made. Third, it depends on what the parties then agreed,
not what happened subsequently or what they expected they might do
subsequently. Fourth, the question must be answered once and for all, and
fifthly it must be answered by reference to the statutory test set out in
section 2(1) of the Act, not by “reverse engineering”, by which Mr Crow meant:
not because the consequences of recognising the contract as one of sale within
the statutory definition might seem unpalatable.
Analysis of the nature of the contract
26.
Mr Crow’s first proposition is well-established and needs no great
elaboration: see eg Stoneleigh Finance Ltd v Phillips [1965] 2 QB 537
(CA). An agreement may also be in substance a contract of sale, even though it
has ancillary aspects, eg for after-sales services, which do not involve the
passing of property and are not by themselves sale. Here, Mr Crow is able to
point out that the basic form and language of the contract is that of sale.
That is true, as far as it goes. But clauses A.1 and A.2 make clear that sale
may here be used in an expanded sense, since the general terms are to apply to
all agreements and services and all subsequent contracts “of whatever nature”,
and “Buyer” is under clause B.1 a defined term which includes “any party
requesting offers or quotations for or ordering Bunkers and/or Services”
(emphasis added). Even apart from that, however, clauses H.1 and H.2 make clear
that the contract has special features. First, they expressly provide not only
for retention of title pending payment, but also expressly that, until such
payment, the “Buyer” is to be in possession of the bunkers “solely as Bailee
for the Seller”. After going on to provide that the Buyer “shall not be
entitled to use the bunkers”, the terms introduce the qualification “other than
for the propulsion of the Vessel”.
27.
The qualification clearly reflects a reality. Bunker suppliers know that
bunkers are for use. If they grant relatively long credit periods combined with
a reservation of title pending payment in full, it is unsurprising that they do
so combined with an express qualification authorising use in propulsion, since
standard terms prohibiting any use would be uncommercial or in practice, no
doubt, simply ignored. Mr Crow vigorously resisted the introduction of any such
considerations, on the basis that they are speculative and that the nature of a
contract cannot change according to the level of certainty with which parties
are to be taken to have expected that bunkers supplied might or might not be
used in propulsion before payment for them was made. But OWBM’s (and RMUK’s)
contractual terms and the assumed facts (particularly paras 13, 20 and 30) -
together with an admissible modicum of commercial awareness on the court’s part
about how ships operate (and in particular how owners strive to keep them
operating) and about the value of credit and the likelihood that full advantage
of it will be taken - all point in one direction. They demonstrate that the
liberty to use the bunkers for propulsion prior to payment is a vital and
essential feature of the bunker supply business.
28.
In these circumstances, OWBM’s contract with the Owners cannot be
regarded as a straightforward agreement to transfer the property in the bunkers
to the Owners for a price. It was in substance an agreement with two aspects:
first, to permit consumption prior to any payment and (once the theory of a
nanosecond transfer of property is, rightly, rejected) without any property
ever passing in the bunkers consumed; and, second, but only if and so far as
bunkers remained unconsumed, to transfer the property in the bunkers so
remaining to the Owners in return for the Owners paying the price. But in this
latter connection it is to be noted that the price does not here refer to the
price of the bunkers in respect of which property was passing, it refers to the
price payable for all the bunkers, whether consumed before or remaining at the
time of its payment.
29.
A contract of sale may under section 2(3) of the Act be either absolute
or conditional; and under section 2(6) “An agreement to sell becomes a sale
when … the conditions are fulfilled subject to which the property in the goods
is to be transferred”. Mr Crow submits on this basis that the contract can be
regarded as an agreement to transfer property, conditional on the bunkers
remaining unburned when payment is made. The difficulties with this submission
are that:
i)
it categorises the whole agreement by reference to only one possibility
relating to only one part of the bunkers covered by the agreement, namely the
possibility of at least some bunkers surviving unused, after 60 days or
whenever payment is made. Sections 2(3) and (6) can readily be applied where
there is a condition regarding the passing of property to which all the goods
covered by an agreement are subject, but that is not the case here;
ii)
it ignores the fact that there is no condition governing the transfer of
property in the bunkers used before payment - the property in bunkers consumed
never passes and is never agreed to be passed; and
iii)
it focuses on the agreement to pass property in the bunkers surviving at
the time of payment, when the agreement was a single contract to pay a single
“price” for all the bunkers sold not later than 60 days after delivery,
whatever had happened to such bunkers in the meantime; the agreement is a
single agreement which cannot sensibly be treated as divisible. As the
arbitrators said, aptly, in para 47 of their award quoted in para 17 above, in
the ordinary course when Owners paid OWBM’s invoice after 60 days:
“it would not have crossed anyone’s
mind to enquire what bunkers had been consumed meanwhile in order to determine
whether the invoice was being paid wholly or in part under a of sale (in
respect of unconsumed bunkers), or otherwise (in respect of consumed bunkers).”
30.
Mr Crow sought to avoid some of these difficulties by submitting at one
point that the agreement could be analysed as one of sale, under which OWBM
undertook that at the date of payment they would transfer property in any
bunkers then remaining and that they could and would also have transferred
property in any bunkers already consumed, had they not been consumed. That
submission certainly has a metaphysical aspect. But it makes in my view neither
legal nor commercial sense. All that mattered for the Owners was that they
should have and had the right to consume the bunkers in the vessel’s propulsion
as and when they did so prior to payment, and that upon payment they would
acquire the property in, and thereby an absolute right to dispose of or use as
they wished, any remaining bunkers.
31.
For similar reasons to those given in the preceding three paragraphs, I
would also reject the Court of Appeal’s suggestion in para 33 of its judgment,
quoted in para 23 above, that the contract can be analysed as a contract of
sale to the extent that it provided for the transfer of property in any part of
the bunkers remaining at the time of payment. That is again to divide up a
single agreement covering the supply of all the bunkers (gasoil and fueloil) at
a single price for each, irrespective of what had happened to them. However, I
fully accept that, viewing in isolation the position of any bunkers remaining
at the time of payment, the transaction relating to them is closely analogous
to a sale. I also accept that, both as regards bunkers consumed and as regards
any bunkers remaining at the time of payment, the contract, although not one of
sale, would contain similar implied terms as to description, quality, etc to those
implied in any conventional sale.
32.
The above analysis is consistent with the approach taken by the Court of
Appeal in the somewhat complicated case of Harry & Garry Ltd v Jariwalla
[1988] WL 1608652. The English buyers, Harry & Garry, had under contracts
of sale received a quantity of sarees which they found defective and in respect
of which they had not yet accepted the relevant bills of exchange, by reference
to which, it appeared, the Indian sellers, the Jariwallas, had however already
succeeded in raising some monies in India. In these circumstances, Harry &
Garry agreed to accept the bills, so acquiring property in the sarees, while
the Jariwallas agreed either to arrange the cancellation of the bills or to
take back and pay for the sarees. Under this agreement, 2,494 sarees were then
selected as sarees which the Jariwallas would, as they did, take back
physically, and it was agreed that the Jariwallas would pay £46,763.45 for such
sarees, with property being retained by Harry & Garry until this full
amount was paid. Through a Mr Shah, the Jariwallas sold some 411 of these
sarees, evidently with the consent of Harry & Garry despite the reservation
of title. Harry & Garry sued for the full £46,763.45 agreed to be paid.
33.
In the court below, Judge Harris had seen the contract as being one of
sale, and on that basis held that, since the circumstances did not fall within
section 49(2), a claim for the price was precluded. In the Court of Appeal,
Harry & Garry’s appeal was allowed. Kerr LJ, giving the main judgment,
noted that section 49(1) was in terms inapplicable, because of the reservation
of title. But he went on to say of the judge’s approach that:
“It would be ironical if that were
the correct analysis. One would be driven to the conclusion that although these
goods had been delivered and had been accepted, the only remedy open to the
plaintiffs, if indeed they were sellers of these goods, would apparently have
been a claim for damages for non-acceptance under section 50, there being no
other provision of the Act which would have given the plaintiffs any remedy.
With all due respect to the judge, no doubt influenced as he was by the
complexity of this case and the arguments which were addressed to him, I cannot
agree with that analysis for two reasons. First, in my view this was not a
contract for the sale of goods within the terms of the 1979 Act. It was not, to
quote section 2(1) of the Act, ‘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’. Like many other contracts in complex situations, this was a
sui generis transaction. In effect, what the Jariwallas agreed was that if the
bills of exchange were accepted, which was their great concern, they would either
have them cancelled or they would take the goods back and pay for them.
When it then came to the specific
agreement about the 2,494 selected sarees, I think the nature of the agreement
was that in consideration of the plaintiffs’ allowing them to take that
consignment away and seeking to dispose of it as agents for the plaintiffs, who
remained the owners of it, they agreed again either to perform the first part
of the option, to have the bills of exchange cancelled at any rate to the
extent of the value of those selected goods, or to pay the sum of £46,763.45p.
That was the nature of the agreement. Taking it on its own or taking it, as I
think one should, as part of the agreement made on 23 December, I do
not think it was a contract for the sale of goods to which the Act applied.”
34.
As with the buy back contract in Harry & Garry, so here, in
my opinion, the relevant agreement is, in Kerr LJ’s words, “Like many other
contracts in complex situations, … a sui generis transaction”, not a contract
of sale. As I have already indicated, that does not mean that its terms, as
regards undertakings as to description and quality, would not be modelled on
those applying in the sale of goods. But, in its essential nature, it offered a
feature quite different from a contract of sale of goods - the liberty to
consume all or any part of the bunkers supplied without acquiring property in
them or having paid for them. The obligation on the part of OWBM to be able to
pass the property in respect of any bunkers not so consumed against payment of
the price for all the bunkers cannot make the agreement as a whole a contract
of sale.
35.
Mr Crow drew our attention to first instance cases where the
relationship between the suppliers of bunkers and charterer customers under a
reservation of title was assumed to fall within the Sale of Goods Act, for the
purposes of analysing whether, on the termination of the charter, the vessel’s
owners had acquired title under section 25(1) of that Act: Forsythe
International (UK) Ltd v Silver Shipping Co Ltd [1994] 1 WLR 1334, Angara
Maritime Ltd v Oceanconnect UK Ltd [2010] EWHC 619 (QB); [2011] 1 Lloyd’s Rep 61. In neither case was the nature of the contract or the present issue
questioned or directly addressed. Similarly, it was simply assumed that the
transaction was one of sale within the Act in the appellate authorities of Borden
(UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25 (CA) and Armour v
Thyssen Edelstahlwerke AG [1991] 2 AC 339 - the former case concerning an
unsuccessful attempt to trace title reserved in resin into chipboard
manufactured using it, the latter concerning a successful attempt to reclaim
steel supplied subject to a reservation of title. I add that, even if on
analysis these two cases could and should have been analysed as sui generis,
like the present, it is difficult to think that could have had any effect on
their outcome. None of these cases therefore really assists the resolution of
the present appeal.
36.
I also add (with further reference to the Court of Appeal’s suggestion
mentioned in para 31 above) that, even if the contract were (contrary to my
above analysis) to be analysed as a contract of sale when made in that it
contemplated the transfer of property in any bunkers unused at the date of
payment, I do not see how this could assist the Owners. OWBM could not owe any
obligation to transfer property in bunkers consumed before payment. The
contract would be subject to a resolutive condition subsequent whereby it would
cease to be a contract of sale as and to the extent that the Owners exercised
their contractual right to consume the bunkers in the vessel’s propulsion, and
would cease entirely to be a contract of sale if and when all such bunkers were
consumed before payment.
37.
For the reasons I have given, the arbitrators were correct, in my
opinion, in concluding that the contract was not one of sale within section 2
of the Sale of Goods Act, with the result that the Owners could have no
possible defence under section 49 to the claim for the price.
The Owners’ alternative ground of appeal
38.
I turn in this light to the Owners’ alternative ground of appeal, which
is that there must, as a matter of obviousness and necessity, have been an
implied term of the contract relating to performance of obligations in the
contractual chain above OWBM, by virtue of which OWBM obtained the bunkers it
supplied to the Owners. In the Court of Appeal at least initially and in the
written case, this is put extremely briefly as an implied duty on OWBM to
perform its obligations by making timeous payment to its supplier. The real
reason why OWBM could not have passed any title to the Owners appears, however,
to have been that OWBAS became insolvent and never paid RMUK. The Owners’
formulation of an implied term in their case would not address this. Not
surprisingly, the matter was therefore put differently and more widely in the
Court of Appeal, which was however left in the end in understandable
uncertainty about the precise content of the alleged implied duty. For similar
reasons to those given by Moore-Bick LJ in para 36, I share the Court of
Appeal’s conclusion that there is no basis or need for any such implied duty,
however it is put.
39.
In short, the essential nature of the bargain is as I have stated in
para 28 of this judgment. As a result, OWBM’s only implied undertaking as
regards the bunkers which it permitted to be used and which were used by the Owners
in propulsion prior to payment was that OWBM had the legal entitlement to give
such permission. In order to be so entitled, OWBM did not need to have or
acquire title to the bunkers. It merely needed to have acquired the right to
authorise such use under the chain of contracts by virtue of which it had
obtained the bunkers. As regards bunkers in existence at the time of any
payment, OWBM would of course have to have had or at least be able to pass
title. Had they been unable to do so, then, maybe, the Owners could have
treated OWBM as in breach of condition and terminated the contract, though they
would at the same time have had to refrain from further use of the bunkers. OWBM
would then have been unable to maintain a claim for the whole price, and would
have had to assert either a contractual or a restitutionary claim (it is
unnecessary to consider which) to pro rata payment for the bunkers consumed.
But none of this is relevant, and for that reason it was not explored in
submissions. What happened was quite different. No payment was ever tendered by
the Owners. The Owners simply continued to use the bunkers under the
contractual liberty until they were all consumed. So far as material, no basis
appears for treating the contractual liberty as ending with the 60-day period
for payment, if payment was not then made; so long as the contract remained in
force, the liberty would continue on its face until payment or complete
consumption of all the bunkers supplied. The issues before the court do not
involve any claim that OWBM had no right to permit such use, or that the Owners
are or may be exposed to any risk of double exposure, either by reason of
RMUK’s claim (never so far as appears formally pursued) or on any other basis.
On the presently assumed facts, therefore the Owners are simply liable for the
price, albeit under a contract sui generis, which is not one of sale.
The position if the contract had been one of sale
40.
In view of the above conclusions, the position if the contract had been
classified as a contract of sale within section 2 of the Sale of Goods Act
cannot and does not arise. The Owners’ case was that, if the contract was one
of sale, then section 49 would preclude any claim by OWBM/ING for the price of
the bunkers used. OWBM/ING challenge this analysis and the Court of Appeal
decision in Caterpillar which currently supports it. Since the point was
fully argued and has general significance, I propose to say something on it.
41.
First, however, I should briefly address the preliminary question, very
specific to this particular case, whether it would, if necessary, even have
been open to OWBM to challenge the correctness of the Court of Appeal’s
decision in Caterpillar. Not without some doubt, I conclude that it
would have been. This is because of the way in which the arbitrators addressed
issue 4(b), as set out in paras 16-18 above. They answered it in their reasons before
and on the face of it independently of their conclusion under issue
9 that the Sale of Goods Act did not apply to the contract. Further, their
reasons appear to postulate that the Sale of Goods Act could apply but that a
contractual claim for payment (albeit not for a “price”) could still be
maintained - otherwise why the references to section 49 ruling out a claim for
the price, to section 50 offering no alternative, and to their conclusion
presenting no challenge to the Sale of Goods Act?
42.
On that basis, was the Court of Appeal correct in Caterpillar to
conclude that, where goods are delivered under a contract of sale, but title is
reserved pending payment of the price, the seller cannot enforce payment of the
price by an action? In Caterpillar the goods had been agreed to be sold
and were delivered by F G Wilson to John Holt & Co (Liverpool) Ltd (“Holt
Liverpool”) which it was known would on-deliver them to its subsidiary, John
Holt plc (“Holt Nigeria”), a Nigerian company. The majority (Patten and Floyd
LJJ) held that, under the relevant terms, Holt Liverpool (not having paid the
price to F G Wilson) had delivered the goods to Holt Nigeria as fiduciary agents
for F G Wilson, and that property had in this situation continued in law to
reside in Holt Liverpool until such delivery, whereupon it had passed directly
from F G Wilson to Holt Nigeria without Holt Liverpool ever acquiring it.
Longmore LJ, although he had dissented on the passing of property, gave the
principal reasoned judgment on the question which arose from the majority’s
conclusion that property had not passed. This was whether F G Wilson could sue
Holt Liverpool for the price. He concluded, after reviewing the authorities,
that section 49 constituted a code, which precluded any action for the price
outside its terms.
43.
The authorities included what Longmore LJ saw as two inconsistent
previous Court of Appeal decisions, one Otis Vehicle Rentals Ltd v Cicely
Commercials Ltd [2002] EWCA Civ 1064, the other the case of Harry &
Garry, discussed above on another aspect and which Longmore LJ’s judgment records
was unearthed by the industry of counsel appearing in Caterpillar.
44.
Section 49(1) enables an action for the price where the seller has
transferred property, with or without delivery, and the buyer has failed to pay
the price due. Conversely, the authorities cited by Longmore LJ establish that,
where property has not passed, a seller cannot sue for the price of goods,
delivery of which the buyer has refused to accept either physically (Atkinson
v Bell (1828) 8 B & C 277; Otis Vehicle Rentals, cited above) or
by refusing to take up the shipping documents (Stein Forbes & Co v
County Tailoring Co (1916) 115 LT 215; Muller, Maclean & Co v Leslie
& Anderson (1921) 8 Lloyd’s List Law Rep 328; Plaimar Ltd v Waters
Trading Co Ltd (1945) 72 CLR 304) or by failing or refusing to make the
necessary shipping arrangements (Colley v Overseas Exporters [1921] 3 KB
302).
45.
An established common law exception (see Dunlop v Grote (1845) 2 Car & K 153) now reflected in section 49(2) of the Act exists where the price
is payable on a day certain, in which case the seller may enforce its payment,
provided that he is ready and able at the same time to deliver to the buyer the
goods and property in them: Otis Vehicle Rentals, para 16 per Potter LJ.
In Caterpillar, Longmore LJ expressed the view that a “price payable on
a day certain” would embrace a situation where the price was expressed to be
payable within 30 days of the date of the invoice. If so, it would embrace the
situation under RMUK’s contract with OWBAS or OWBM’s contract with the Owners,
whereby the price was payable within respectively 30 or 60 days of delivery.
This was also Males J’s view, differing on the point from the arbitrators.
46.
Leaving section 49(2) aside, the question of principle is whether
section 49 excludes any claim to recovery of a price outside its express terms.
The majority of the High Court of Australia in Minister for Supply and
Development v Servicemen’s Co-operative Joinery Manufacturers Ltd (1951) 82
CLR 621 can be read as accepting that similar statutory language did not
exclude all such claims. However, whilst Latham CJ, one of the majority, made
no express reference to section 49(2), he did refer to Dunlop v Grote,
cited above, and to Benjamin on Sale, 7th ed (1931), p 861, which both
deal with a price payable on a day certain. It is not clear that he necessarily
intended to go further.
47.
In Colley v Overseas Exporters, cited above, McCardie J undertook
a detailed examination of the pre-1893 Sale of Goods Act position at common
law, concluding that there had been only two established counts available for
recovery of the price of goods sold, both dependant on property passing and so
falling within what became section 49(1). Section 49(2) was a limited
exception. Support for this can be found in the illuminating discussion and
judgments in Laird v Pim (1841) 7 M & W 474, to which McCardie J
also referred. In that case, the defendant, having contracted to purchase and
having been given possession of a plot of land, had refused to complete a
conveyance or pay for it. During the proceedings, the analogy with the
non-acceptance of goods was drawn, and at one point Parke B pointed out that,
since the land was still the plaintiff’s at law, the plaintiff might bring
ejectment. The plaintiff made clear however that it was not claiming the price
of the whole purchase money, but “only for the damages sustained by the non-performance
of the contract” (p 479). To this counsel for the defendant responded (p 483)
that “Unless the defendants are bound to pay the purchase-money, no damages can
be recovered for the non-payment of it: the plaintiff, therefore, must shew not
only that the defendants did not pay, but also that they were bound to pay”.
But this argument failed. Parke B said (p 485) that the plaintiff was
“substantially in the same
situation, for the purpose of recovering the money, as if all had been done on
his part which he engaged to do. It does not follow that he shall recover the
whole purchase-money, but he is in the same situation for the purpose of
recovering damages for the non-payment of the price, as if all had been done by
him.”
48.
That approach, if adopted, at least answers the problem which Longmore LJ
found in paras 55-56 in Caterpillar about accepting a claim for damages
for non-payment of money or seeing any remedy whatever open to the seller. I
add three observations. First, it would seem to me that the non-performance in
a case like Laird v Pim could just as well be described in terms of
failure to accept a transfer of the title to property, as failure to pay its
price. Second, if described as a claim for failure to pay the price, the
judgments in Sempra Metals Ltd v Inland Revenue Comrs [2008] AC 561 mean,
I believe, that a claim for damages for non-payment of money could quite
readily be accommodated in the modern law. Third, in Laird v Pim, the
damages might have had to be reduced to take account of the prospect of
recovery of the property - the law report does not address their measure more
precisely than I have already indicated. In the present case, bearing in mind
the complete consumption of the bunkers, there would be no difference between
the agreed price and the damages for non-payment of the price that would follow
on the approach taken in Laird v Pim.
49.
Nonetheless, there is artificiality about treating the seller’s claim as
being for damages, after delivery was made albeit under retention of title, and
particularly so where the buyer is authorised to consume the goods as here.
Part of the thinking behind the rule in section 49(1) is no doubt, as Longmore
LJ observed (para 43), that
“It would have been thought unfair
to a buyer if, before delivery had occurred, the goods had perished or been
damaged and yet the price was payable, unless the goods were actually his
property, see Simmons v Swift (1826) 5 B & C 857. It would also be
odd if a seller’s creditors on bankruptcy could both seize goods still on his
premises and sue the buyer for the price.”
However, it will be noted that both these rationales
focus on situations where delivery has not been made, and, as appears from the
judgments in Simmons v Swift, the real significance attached by the
court to the fact that property had not passed in Simmons v Swift was
that it meant that the goods were still at the risk of the sellers. The oddity
mentioned by Longmore LJ would not have existed, if the goods had been at the
buyer’s risk.
50.
Section 49(2) relaxes only partially the strictness of section 49(1),
and it depends on the price being “payable on a day certain”. These are words
which can no doubt be construed liberally, as Longmore LJ was minded to, but
are not of indefinite expansion. Further, the main focus of section 49(2) may
well have been on cases where delivery has not been made - hence the phrase
“irrespective of delivery”. Section 49 does not focus on the position existing where
delivery is made, title is reserved but the price is agreed to be paid, albeit
not on a particular “day certain”. Even less does it focus on the position
where all these features are present and the buyer is permitted to dispose of or
consume the goods or they are at the buyer’s risk and are destroyed or damaged.
The question is whether in all these cases an action for the price is excluded,
and the seller is forced to look around for other means of redress.
51.
The Court of Appeal, in an alternative reason for its judgment in Harry
& Garry, did not think so. Kerr LJ, now approaching the case on the
hypothesis that the buy back contract was subject to the Sale of Goods Act,
said this:
“In any event, however - and this
is the second reason why I differ from the judge - it is clear from the
authorities to which we were referred that even in the realm of contracts for the
sale of goods there can be situations in which a seller may be entitled, under
the particular terms of the contract, to claim a sum which is in effect the
price of the goods, even though he cannot bring himself within the terms of
section 49.
In that connection we were
helpfully referred by Mr Bartlett to another section of the Act and a number of
authorities. I can deal with them quite shortly. First, section 55 of the Act
makes it clear that the provisions of the Act are not exhaustive, but that the
parties may enter into agreements which negative or vary the rights, duties or
liabilities which would otherwise arise under a contract of sale by virtue of
the Act. Secondly, Mr Bartlett referred to a part of the speech of Lord Diplock
in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441, 501, in
which he points out that the Sale of Goods Act is not an exhaustive code within
which every transaction of the nature of a sale of goods must necessarily be
brought, but that it is open to parties, if they have done so by the terms of
their agreement, to create situations which, while being contracts for the sale
of goods, are not governed exclusively by the terms of the Act.
It is true that in Colley v
Overseas Exporters [1921] 3 KB 302, 310, McCardie J expressed the obiter
view that section 49(2) was an exhaustive statement (together with subsection
(1)) of situations in which a seller is entitled to sue for the price. But that
was clearly not the view of Wright J as expressed in Shell-Mex Ltd v Elton
Cop Dyeing Co Ltd (1928) 34 Commercial Cases at p 39, where he referred to
what is now section 55 of the 1979 Act and the particular terms of the
contract. He concluded that on its true construction the sellers were not
entitled to recover the price, but without regard to the fact that on no view
could the case have been brought within section 49.”
Kerr LJ went on to state that that had been the view of
the majority of the High Court of Australia, in Minister for Supply and
Development v Servicemen’s Co-operative Joinery Manufacturers Ltd, before
concluding:
“If, contrary to the primary view
which I have expressed, this transaction recorded in the form of the document
of 31 December 1982 was indeed a sale by the plaintiffs to the Jariwallas, then
in my view, having regard to the agreement as a whole which the judge has
found, it would still be open to the plaintiffs to sue for the £46,000-odd once
a reasonable time had elapsed and it had become clear - all of which has now
happened - that they were not going to be relieved from the bills of exchange.
Accordingly, I would allow this appeal to the extent of judgment for the
plaintiffs for £46,763.45p, with the appropriate interest.”
52.
Like Longmore LJ in Caterpillar (para 53), I am unconvinced that
the solution to the present problems is found in section 55 or in Lord
Diplock’s dicta in Ashington Piggeries. Both concern the negativing or
variation of any “right, duty or liability [which] would arise under a contract
of sale of goods by implication of law”, into which category it is difficult to
fit the statutory provisions of section 49. I am also unconvinced that Wright
J’s judgment in Shell-Mex is of present assistance, and I have already
questioned whether both members of the majority in the High Court of Australia
in the Minister of Supply case were necessarily speaking of situations
outside section 49(2).
53.
Nevertheless, the 1893 Act was rooted in and intended to reflect common
law authority, developed in an era when freedom of contract and trade were
axiomatically accepted as beneficial. Certainly, a court could not now
recognise a claim for the price in a case falling squarely within section 50,
and it should be cautious about recognising claims to the price of goods in
cases not falling within section 49. But I consider that this leaves at least
some room for claims for the price in other circumstances than those covered by
section 49.
54.
Harry & Garry is on its facts such a case. Title being
reserved to Harry & Garry, the Jariwallas were nonetheless permitted to take
possession under the buy back contract, and to dispose of some of the sarees of
which possession was taken back. It seems entirely natural and appropriate that
Harry & Garry should be entitled to recover for the price of all the sarees
so taken back, on condition of course that they were ready and willing to
transfer title in the remaining sarees to the Jariwallas in return.
55.
Another case covered by authority is that where the goods are at the buyer’s
risk, but property has not passed. This situation was addressed in two
successive cases in 1872: Castle v Playford (1872) LR 7 Ex 98 and Martineau
v Kitching (1872) LR 7 QB 436. In the former, the contract for the sale of
ice was for cash on delivery at the rate of 20s a ton as weighed on arrival and
delivery in the United Kingdom, but it was agreed that the buyer should “take
upon himself all risks and dangers of the seas”. The vessel was lost. The court
(Cockburn CJ, Willes, Blackburn, Mellor, Brett and Grove JJ) found it
unnecessary to decide whether property had passed. Whether or not it had, the
true construction of the contract was from the buyer’s viewpoint, in Cockburn
CJ’s words, at p 99:
“I will engage, when it arrives,
to pay you according to what may be its value; and if, in the meantime, while
it is upon the seas, it shall perish through the perils of the seas, I will
undertake to pay you for it according to what may be estimated to have been its
fair value at the time of going down.”
Blackburn J giving the other reasoned judgment said, at p
100:
“Now here, the ship and cargo have
gone to the bottom of the sea; but in the cases of Alexander v Gardner (1835) 1 Bing NC 671, and Fragano v Long (1825) 4 B & C 219, it was held,
that if the property did perish before the time for payment came, the time being
dependent upon delivery, and if the delivery was prevented by the destruction
of the property, the purchaser was to pay an equivalent sum. In the present
case, when the ship went down there would be so much ice on board, and, in all
probability, upon an ordinary voyage so much would have melted; and what the
defendant has taken upon himself to pay is the amount which, in all
probability, would have been payable for the ice.”
The two judgments define the sum payable in very slightly
different ways, but both treat it as a sum payable for the goods under the
contract terms.
56.
Three months later the second case came before Cockburn CJ, Blackburn,
Lush and Quain JJ in the Queen’s Bench Division. Sugar was agreed to be sold,
with the price payable “Prompt at one month; goods at seller’s risk for two
months”, to be kept at the seller’s premises and drawn down by the buyers as
wanted. After two months and after only some of the sugar had been drawn down
by the buyers, a fire destroyed the rest. The buyer having disputed his
liability to pay for the undelivered sugar which had been burned in the fire,
the seller brought an action “to recover the price of [the] sugars sold” and
the question was whether the sellers were so entitled (see pp 436, 441, para
21; and p 445). The court held that they were. Cockburn CJ did so on the basis
that property had passed. But Blackburn, Lush and Quain JJ found it unnecessary
to decide this, and they all decided the case on the basis that after two
months the risk had passed. Blackburn J put the matter thus, at p 455:
“[A]ssume that [property] had not
passed. If the agreement between the parties was, ‘I contract that when you pay
the price I will deliver the goods to you, but the property shall not be yours,
they shall still be my property so that I may have dominion over them; but
though they shall not be yours, I stipulate and agree that if I keep them beyond
the month the risk shall be upon you;’ and then the goods perish; to say that
the buyer could then set up this defence and say, ‘Although I stipulated that
the risk should be mine, yet, inasmuch as an accident has happened which has
destroyed them, I will have no part of that risk, but will throw it entirely
upon you because the property did not pass to me,’ is a proposition which,
stated in that way, appears to be absolutely a reductio ad absurdum; and that
is really what the argument amounts to. If the parties have stipulated that, if
after the two months the goods remain in the sellers’ warehouse, they shall,
nevertheless, remain there at the buyer’s risk, it would be a manifest
absurdity to say that he is not to pay for them; and I think the case of Castle
v Playford is a clear authority of the Court of Exchequer Chamber, that
where the parties have stipulated that the risk shall be on one side, it
matters not whether the property had passed or not. The parties here have by
their express stipulation impliedly said, after the two months the goods shall
be at the risk of the buyer, consequently it is the buyer who must bear the
loss.”
57.
The price may therefore be recovered in respect of goods undelivered
which remain the seller’s property but are at the buyer’s risk and are
destroyed by perils of the seas or by fire. The present situation is in my
opinion a fortiori. The price of bunkers, which remain the seller’s property
but which are both (i) at the buyer’s risk as regards damage or destruction (clause
G.12) and (ii) also permitted by the express terms of the contract to be
destroyed by use for the Owners’ commercial benefit, must be equally
recoverable. I add that I do not suggest that this is the limit of the
circumstances outside section 49 in which the price may be recoverable. The
decision in Harry & Garry itself was that the price was recoverable
for all the 2,494 sarees agreed to be bought back, although only 411 of them
had been disposed of by the buyers with the seller’s permission. The precise
limits of such circumstances - and the significance which may in particular
attach to the use of retention of title clauses in combination with physical
delivery of the goods and the transfer of risk - must be left for determination
on some future occasion. I would only add that, when that occasion arises, much
benefit will be obtained (as I have done in writing this judgment) from the perceptive
discussion by Professor Louise Gullifer in her article The interpretation of
retention of title clauses: some difficulties (2014) LMCLQ 564. She also
addresses some critical remarks to the other issue in the Caterpillar
case, that is the interpretation of Holt Liverpool’s role as one of agency on
behalf of F G Wilson in parting with the goods to Holt Nigeria. That issue does
not arise here, but may well merit further consideration in another case in
this court.
58.
It follows from what I have said that, had the contract been one of
sale, I would have held, over-ruling the Caterpillar case on this point,
that section 49 is not a complete code of situations in which the price may be
recoverable under a contract of sale, and that, in the present case, the price
was recoverable by virtue of its express terms in the event which has occurred,
namely the complete consumption of the bunkers supplied.
Conclusion
59.
In the result, I conclude that, on the assumed facts:
(i)
the contract between OWBM and the Owners was not one of sale, but sui
generis;
(ii)
that it was not subject to any such implied term or terms, regarding
performance by OWBM (or OWBAS) of any supply contract higher up the chain, as
the Owners have alleged - though it was no doubt subject to an implied promise
by OWBM that OWBM was entitled (in consequence of whatever were the
arrangements under which the bunkers had been obtained directly or indirectly
from whoever was interested in them) to supply them to the Owners on terms
permitting their use for the propulsion of the vessel before payment; and
(iii)
that the Owners have no defence to OWBM’s claim to the agreed price.
60.
Had I concluded on the other hand that the contract was one of sale, I
would, again on the assumed facts, have held that section 49 of the Sale of
Goods Act was also no bar to a claim by OWBM to payment of the agreed price.
