U.K. Court Rules in Favor of OW Bunker
The U.K. Supreme Court ruled in favor of bankrupt marine fuel supplier OW Bunker Malta (OWB) in a dispute over payment liabilities, effectively leaving an unknown number of buyers around the world liable to pay for the same fuel twice.
"The Supreme Court unanimously dismisses the appeal by the owners, PST Energy," the court said.
The so-called Res Cogitans case involved PST Energy 7 Shipping LLC who contracted with the now bankrupt OWB for bunkers that were physically delivered to its vessel Res Cogitans by a Rosneft Marine (U.K.) subsidiary around the time of OWB's bankruptcy.
However, OW Bunker did not pay Rosneft nor did PST pay OW Bunker.
ING Bank, as the company responsible for settling OW Bunker's debts, attempted to collect payment from PST that was contractually owed. However, PST countered that it was not liable to pay ING because the contract was a sale of goods governed by the Sale of Goods Act of 1979.
Following the November 2014 collapse of Denmark-based OW Bunkers, the world's biggest bunker supplier at the time, this left hundreds of ship owners liable to paying twice for the same bunkers - to ING as the assignee of OW Bunkers, under the contractual agreement, and to the physical suppliers for the actual bunker fuel.
Earlier court decisions found that ING could collect payment, setting up the Supreme Court decision on Wednesday.
"Shipowners are left facing double jeopardy and competing demands for payment for the same supplies of bunkers from both insolvent OW Bunker and from physical suppliers," said Scott Pilkington and Paul Dean, attorneys with Holman Fenwick Willan in Singapore and London, in an e-mail. "Owners and operators who have not settled OW Bunker's claims will now face renewed action by ING Bank."
UK Defence Club, the leading provider of legal costs insurance to the maritime industry, stated: “The U.K. Supreme Court has today handed down its decision in the case of the Res Cogitans which involved a Member facing competing demands for the payment of bunkers following the demise of the OW Bunker Group of companies.
“The Court has held that the contract between the owner member and OW was not a contract for the sale of goods, but simply a contract which entitled the member to use the bunkers, with a corresponding obligation to pay for them. The Sale of Goods Act therefore does not apply to this type of contract.
“Although a disappointing outcome, the U.K. Defence Club, which has supported its member throughout this case, has been committed to resolving this extremely important point for this member and for the industry generally.
“Given the outcome of this case, members and other operators will need to carefully review their bunker contracts in order to protect themselves from such situations arising in the future.”