UK Court Rejects Latest Appeal in OW Bunker Malta Case

The UK Supreme Court has unanimously dismissed the latest appeal from the Greek company Product Shipping & Trading (PST) in a case it brought to the court against the bankrupt marine fuel supplier OW Bunker Malta Limited.

The appeal was the latest one following a number of cases launched against OW Bunker, which filed for bankruptcy in November 2014, and its subsidiaries.

PST launched arbitration against OWB and ING, seeking a declaration that they were not bound to pay for the bunkers, or damages for breach of contract, on the grounds that OWB had been unable to pass title to them.

The arbitrators determined that OWB did not undertake to transfer property in the bunkers to the owners under the contract and that the owners therefore remained liable to pay OWB/ING.

According to the court ruling, because the bunker fuel, delivered to PST from OW Bunker, was consumed prior to the supply being paid for, the Sale of Goods Act 1979 (SOGA) does not apply to the relevant bunker supply contract.

SOGA requires that the seller must have the right to sell the goods and if the seller is unable to pass title, a total failure of consideration pursuant to section 49(1) will usually arise, relieving the buyer of its obligation to pay.

PST, the owner and manager of the 75,000 dwt vessel Res Cogitans, ordered a quantity of marine fuel from OWB in October 2014. The contract between OWB and the owners provided for payment 60 days after delivery and included a clause under which property was not to pass to the owners until payment for the bunkers had been made. It also entitled the owners to use the bunkers for the propulsion of Res Cogitans from the moment of delivery.

OWB acquired the bunkers from its parent company, OW Bunker & Trading A/S, which secured them from Rosneft Marines (UK) Ltd, which in turn was supplied from RN-Bunker Ltd.

Due to the price of bunker supply and the 60-day credit period stated by the contract, OWB was in need of financing, which it received from ING Bank. In turn, ING took a charge over the English-law receivables of OWB.

The case, known as the Res Cogitans case, involved successive appeals to the High Court and the Court of Appeal in London, all of which stated that the OWB supply contract is valid and enforceable.

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