The Res Cogitans

1034
PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (SC(E))

(SC(E)) [2016] AC
Supreme Court A
PST Energy 7 Shipping LLC and another v OW Bunker

Malta Ltd and another
[2015] EWCA Civ 1058
B
[2016] UKSC 23
2015 Sept 17; Moore-Bick, Longmore, McCombe LJJ
Oct 22
2016 March 22, 23; Lord Neuberger of Abbotsbury PSC,
May 11 Lord Mance, Lord Clarke of Stone-cum-Ebony,
Lord Hughes, Lord Toulson JJSC C
Shipping Bunkers Contract to supply Payment on credit terms with title
passing only on payment Owners entitled to use bunkers before payment for
propulsion of vessel Whether statutory provisions relating to contract of sale
of goods applying Whether suppliers entitled to recover price of bunkers
from owners Sale of Goods Act 1979 (c 54), ss 2, 49
Ships names Res Cogitans
D
The rst supplier contracted with the shipowners to supply bunkers of fueloil and
gasoil for the propulsion of their vessel. The contract incorporated the rst suppliers
standard terms of business, which provided for payment 60 days after delivery and
contained both a retention of title clause under which property was not to pass to the
owners until the bunkers had been paid for in full and a clause entitling the owners to
use the bunkers to propel the vessel from the moment of delivery. A chain of further
contracts for the supply of the bunkers was entered into, the actual delivery being E
made by a company at the port where the vessel was berthed. After the bunkers had
been supplied the rst suppliers parent company, which was the second supplier in
the chain, began proceedings for restructuring which constituted an event of default
under a nancing agreement between the group and its bank. The bank then asserted
a right to recover as assignee the debt, if any, owed by the owners to the rst supplier
for the supply of the bunkers, and the third supplier asserted ownership of the
bunkers for which it intended to seek payment from the owners. On the assumed F
facts, some or all of the bunkers had been consumed by the expiry of the 60-day
period provided for in the rst suppliers terms. In arbitration proceedings the
owners sought a declaration that they were not bound to pay either the rst supplier
or its bank for the bunkers supplied to the vessel, or alternatively damages for breach
of contract, on the ground that the rst supplier had been unable to pass title in the
bunkers. The arbitrators held that the eect of the rst suppliers terms, in particular
the retention of title clause combined with the owners right to use the bunkers for the G
propulsion of the vessel in advance of payment, had been that the rst supplier had
not undertaken to transfer property in the bunkers to the owners, and accordingly the
contract was not a contract of sale of goods within the meaning of the Sale of
Goods Act 19791, and therefore the rst supplier could not claim the price of the
bunkers under section 49(1) of that Act but was entitled to recover the sum due as a
simple debt. The owners appealed and the rst supplier and the bank cross-appealed.
The judge armed the arbitrators decision, holding that the rst supplier had not H
undertaken to transfer property in the bunkers because both parties had envisaged
that some or all of them were likely to have been consumed in the propulsion of the
vessel before payment became due, so that they would then cease to exist and it
1
Sale of Goods Act 1979, ss 2(1), 49: see post, Supreme Court judgment, para 12.
' 2016 The Incorporated Council of Law Reporting for England and Wales
1035
[2016] AC PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (SC(E))
(SC(E))
A would become impossible to transfer property in them. The Court of Appeal

dismissed the owners appeal.
On the owners further appeal
Held, dismissing the appeal, that, liberty to use bunkers for propulsion prior to
payment being a vital and essential feature of the bunker supply business, the rst
suppliers contract with the owners was not a straightforward agreement to transfer
the property in the bunkers to the owners for a price but rather was in substance an
B agreement (i) to permit consumption prior to any payment and without any property
ever passing in the bunkers consumed and (ii), 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 for all the bunkers, whether already consumed
or not; that, therefore, the contract between the rst supplier and the owners was not
one of sale within section 2 of the Sale of Goods Act 1979, but was sui generis, with
the result that the owners had no possible defence under section 49 of the 1979 Act to
C the rst suppliers claim to the agreed price; that the rst suppliers only implied
undertaking in relation to the bunkers which it had permitted to be used and which
had been used by the owners for propulsion prior to payment was that it had the legal
entitlement to give such permission and, in order to be so entitled, 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, which it had done; and that, accordingly, the
owners were liable for the price, albeit under a contract sui generis (post,
D paras 2628, 34, 37, 39, 59).
Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25, CA, Armour v
Thyssen Edelstahlwerke AG [1991] 2 AC 339, HL(Sc), Forsythe International
(UK) Ltd v Silver Shipping Co Ltd [1994] 1 WLR 1334 and Angara Maritime Ltd v
Oceanconnect UK Ltd (No 2) [2011] 1 Lloyds Rep 61 considered.
Per curiam. Section 49 of the Sale of Goods Act 1979 is not a complete code of
situations in which the price may be recoverable under a contract of sale and, had the
E contract between the rst supplier and the owners been one of sale, the price would
be recoverable by virtue of its express terms in the event which has occurred, namely
the complete consumption of the bunkers supplied (post, paras 58, 60).
FG Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2014] 1 WLR
2365, CA disapproved.
Decision of the Court of Appeal, post, p 1039; [2015] EWCA Civ 1058; [2016]
2 WLR 1072 armed.
F
The following cases are referred to in the judgment of Lord Mance JSC in the
Supreme Court:
Angara Maritime Ltd v Oceanconnect UK Ltd (No 2) [2010] EWHC 619 (QB);
[2011] 1 Lloyds Rep 61
Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339; [1990] 3 WLR 810; [1990]
G 3 All ER 481; [1991] 1 Lloyds Rep 95, HL(Sc)
Atkinson v Bell (1828) 8 B & C 277
Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25; [1979] 3 WLR 672;
[1979] 3 All ER 961; [1980] 1 Lloyds Rep 160, CA
Castle v Playford (1872) LR 7 Ex 98
Colley v Overseas Exporters [1921] 3 KB 302; 8 Ll L Rep 127
Dunlop v Grote (1845) 2 Car & K 153
H Forsythe International (UK) Ltd v Silver Shipping Co Ltd (The Seatta) [1994] 1 WLR
1334; [1994] 1 All ER 851; [1993] 2 Lloyds Rep 268
Harry & Garry Ltd v Jariwalla (unreported) 16 June 1988; [1988] CA Transcript
No 516, CA
Hill (Christopher) Ltd v Ashington Piggeries Ltd [1972] AC 441; [1971] 2 WLR
1051; [1971] 1 All ER 847; [1971] 1 Lloyds Rep 245, HL(E)
1036
(SC(E)) [2016] AC
Laird v Pim (1841) 7 M & W 474 A

Martineau v Kitching (1872) LR 7 QB 436
Minister for Supply and Development v Servicemens Co-operative Joinery
Manufacturers Ltd (1951) 82 CLR 621
Muller, Maclean & Co v Leslie & Anderson (1921) 8 Ll L Rep 328
Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002] EWCA Civ 1064, CA
Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304
Rowland v Divall [1923] 2 KB 500, CA B
Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Comrs [2007]
UKHL 34; [2008] AC 561; [2007] 3 WLR 354; [2008] Bus LR 49; [2007] 4 All
ER 657, HL(E)
Shell-Mex Ltd v Elton Cop Dyeing Co Ltd (1928) 34 Com Cas 39
Simmons v Swift (1826) 5 B & C 857
Stein Forbes & Co v County Tailoring Co (1916) 115 LT 215
Stoneleigh Finance Ltd v Phillips [1965] 2 QB 537; [1965] 2 WLR 508; [1965] 1 All C
ER 513, CA
Wilson (FG) (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2013] EWCA Civ
1232; [2014] 1 WLR 2365; [2014] 1 All ER 785; [2014] 1 All ER (Comm) 393;
[2014] 1 Lloyds Rep 180, CA
The following additional cases were cited in argument before the Supreme Court:
D
Clough Mill Ltd v Martin [1985] 1 WLR 111; [1984] 3 All ER 982, CA
Demby Hamilton & Co Ltd v Barden [1949] 1 All ER 435
Hollis Bros & Co Ltd v White Sea Timber Trust Ltd [1936] 3 All ER 895; 56 Ll L Rep
78
Pordage v Cole (1668) 1 Saund 319l
The following cases are referred to in the judgment of Moore-Bick LJ in the Court of
E
Appeal:
Armour v Thyssen Edelstahlwerke AG 1986 SLT 452; 1989 SLT 182, Ct of Sess;
[1991] 2 AC 339; [1990] 3 WLR 810; [1990] 3 All ER 481; [1991] 1 Lloyds Rep
95, HL(Sc)
Arnold v Britton [2015] UKSC 36; [2015] AC 1619; [2015] 2 WLR 1593; [2016]
1 All ER 1, SC(E)
Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25; [1979] 3 WLR 672; F
[1979] 3 All ER 961; [1980] 1 Lloyds Rep 160, CA
Chaigley Farms Ltd v Crawford, Kaye & Grayshire Ltd (trading as Leylands) [1996]
BCC 957
Clough Mill Ltd v Martin [1985] 1 WLR 111; [1984] 3 All ER 982, CA
Rowland v Divall [1923] 2 KB 500, CA
The following additional cases were cited in argument before the Court of Appeal: G
Barber v NWS Bank plc [1996] 1 WLR 641; [1996] 1 All ER 906, CA
Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1966] 1 QB 650; [1965]
3 WLR 934; [1965] 3 All ER 273; [1965] 2 Lloyds Rep 229, CA
Morris v CW Martin & Sons Ltd [1966] 1 QB 716; [1965] 3 WLR 276; [1965] 2 All
ER 725; [1965] 2 Lloyds Rep 63, CA
Springwell Navigation Corpn v JP Morgan Chase Bank [2010] EWCA Civ 1221; H
[2010] 2 CLC 705, CA
Wilson (FG) (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2012] EWHC
2477 (Comm); [2013] 1 All ER (Comm) 223; [2012] 2 Lloyds Rep 479; [2013]
EWCA Civ 1232; [2014] 1 WLR 2365; [2014] 1 All ER 785; [2014] 1 All
ER (Comm) 393; [2014] 1 Lloyds Rep 180, CA
1037
[2016] AC PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (CA)
A The following additional cases, although not cited, were referred to in the skeleton
arguments before the Court of Appeal:
Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676;
[1976] 2 All ER 552; [1976] 1 Lloyds Rep 443, Mocatta J and CA
Angara Maritime Ltd v Oceanconnect UK Ltd (No 2) [2010] EWHC 619 (QB);
[2011] 1 Lloyds Rep 61
Astro Exito Navegacion SA v Southland Enterprise Co Ltd (No 2) [1982] QB 1248;
B [1982] 3 WLR 296; [1982] 3 All ER 335, CA
Castle v Playford (1872) LR 7 Ex 98
Colley v Overseas Exporters [1921] 3 KB 302; 8 Ll L Rep 127
Dunlop v Grote (1845) 2 Car & K 153
Forsythe International (UK) Ltd v Silver Shipping Co Ltd (The Seatta) [1994] 1 WLR
1334; [1994] 1 All ER 851; [1993] 2 Lloyds Rep 268
Fragano v Long (1825) 4 B & C 219
C Harry & Garry Ltd v Jariwalla (unreported) 16 June 1988; [1988] CA Transcript
No 516, CA
Hill (Christopher) Ltd v Ashington Piggeries Ltd [1972] AC 441; [1971] 2 WLR
1051; [1971] 1 All ER 847; [1971] 1 Lloyds Rep 245, HL(E)
Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198
Martineau v Kitching (1872) LR 7 QB 436
D Manufacturers Ltd (1951) 82 CLR 621
Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002] EWCA Civ 154, CA
Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900; [2012]
Bus LR 313; [2012] 1 All ER 1137; [2012] 1 All ER (Comm) 1; [2012] 1 Lloyds
Rep 34, SC(E)
Shell-Mex Ltd v Elton Cop Dyeing Co Ltd (1928) 34 Com Cas 39
Span Terza, The (No 2) [1984] 1 WLR 27; [1984] 1 Lloyds Rep 119, HL(E)
E Stein Forbes & Co v County Tailoring Co (1916) 115 LT 215
Warman v Southern Counties Car Finance Corpn Ltd [1949] 2 KB 576; [1949] 1 All
ER 711
White and Carter (Councils) Ltd v McGregor [1962] AC 413; [1962] 2 WLR 17;
[1961] 3 All ER 1178; 1962 SC (HL) 1, HL(Sc)
Young v Bristol Aeroplane Co Ltd [1944] KB 718; [1944] 2 All ER 293; 78 Ll L Rep
6, CA
F
APPEAL from Males J
By a claim form led on 5 May 2015 the owner and the manager
respectively of the vessel Res Cogitans, PST Energy 7 Shipping LLC and
Product Shipping & Trading SA (both limited liability companies formed in
the Marshall Islands and collectively the owners), applied under
section 69(2)(b) of the Arbitration Act 1996 for leave to appeal against the
G award dated 15 April 2015, issued by a tribunal consisting of Mr David
Farrington, Mr Kinnell QC and Mr Bruce Harris, on questions of law arising
out of a contract for the supply of bunkers to the vessel by the rst supplier,
OW Bunker Malta Ltd. The rst suppliers bank, ING Bank NV, which was
also a party to the arbitration, asserted a right to recover, as assignee, any
debt owed by the owners to the rst supplier in respect of that supply. The
questions of law raised by the appeal were, among others, whether (i) the
H
contract between the owners and the rst supplier in respect of the bunker
supply was a contract of sale of goods within the meaning of the Sale of
Goods Act 1979; (ii) the implied terms pursuant to section 12 of the 1979
Act applied to the contract; (iii) if the contract was not a contract of sale
within the 1979 Act, the eect on the owners claim was none as found by
1038
PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (CA) [2016] AC
the arbitrators, and in particular whether terms would be implied in like A

form to those under section 12 of the 1979 Act in any event; (iv) the contract
contained an obligation on the rst supplier to have property at the time of
delivery or consumption of the bunkers by the owners; and (v) the
arbitrators had been wrong to nd that the contract was not a contract of
sale within the 1979 Act and accordingly the answers to the preliminary
issues which were based on such premises were also wrong.
B
By a claim form led on 8 May 2015 the rst supplier and the bank
sought to cross-appeal, opposing the owners appeal and seeking to uphold
the arbitrators award on dierent or additional grounds, among others, that
(1) the tribunal ought to have found that, as a matter of construction or by
an implied term, the contracts for the supply of bunkers to the rst supplier
were subject to implied qualications permitting those suppliers to resell the
bunkers as principal for consumption by the owners and in so doing pass C
good title, property being retained by the rst supplier until such time as the
bunkers were consumed or paid for by the owners; (2) the tribunal had
wrongly found that for the purposes of section 49(2) of the 1979 Act it was
necessary for a xed date for payment to be stated in or identiable from the
contract of sale or capable of being ascertained at the date of the contract,
and ought to have found that it was sucient for the purposes of
D
section 49(2) if the date of payment could be ascertained with precision in
the course of performance of the contract; and (3) the tribunal had wrongly
concluded that no claim in bailment could succeed, whereas it ought to have
found that the bailment had been on terms which included implied
obligations that the owners would pay for the bunkers consumed for the
propulsion of the vessel, or a reasonable price, and the owners were in
breach of those obligations. E
On 14 July 2015 Males J handed down a judgment [2015] EWHC 2022
(Comm); [2015] 2 Lloyds Rep 563 arming the decision of the arbitrators
that the contract was not one for the sale of goods within the Sale of Goods
Act 1979, and as a result the rst supplier and the bank could not recover the
price of the bunkers under section 49 of the 1979 Act but were entitled to
recover the sum due as a simple debt.
F
By an appellants notice led on 20 July 2015 and pursuant to permission
granted by the judge, the owners appealed on the grounds, among others,
that (1) the judge had misdirected himself and failed to apply the law
correctly in holding that the contract incorporating the rst suppliers
standard terms and conditions was not a contract of sale of goods within the
meaning of section 2(1) of the Sale of Goods Act 1979; (2) the judge had
failed to construe correctly the contract terms, which were clear and G
unambiguous, and ought to have given eect to the intention of the parties
and applied the natural and ordinary meaning of the words (see Arnold v
Britton [2015] AC 1619); (3) the judge had impermissibly elevated his own
view of the intention of the parties by concluding that the object of the
contract and by dint thereof every bunker supply contract, was to provide
fuel for propulsion and not any other purpose and that accordingly any
H
actual, intended or potential passing of property was ancillary and at best
incidental; there was no proper basis for the judge to have concluded by
implication that the parties intentions were other than as expressed in the
clear language of their contract, which reected the position throughout the
entire bunker supply market; (4) the judge had impermissibly taken into
1039
Moore-Bick LJ
A account facts and matters which had arisen after the formation of the
contract, and in particular he had concluded that, since there was likelihood
of any agreement to sell not maturing into a sale, the parties had never
intended to enter into an agreement to sell; (5) the judge had impermissibly
let the question of what remedy might be available to the rst supplier
inform his conclusion as to whether the contract was within the 1979 Act;
B
and (6) if the judge had been correct in holding that the 1979 Act did not
apply to the contract, he had been in error in holding that terms identical or
equivalent to those under section 12, and in particular section 12(1), would
not have been implied into the contract.
On 9 September 2015 the third supplier, Rosneft Marine (UK) Ltd, was
granted permission by the Court of Appeal (Vos LJ) to le written
submissions.
C By a respondents notice dated 24 July 2015 the rst supplier asked the
court to uphold the judges decision on dierent or additional grounds,
principally that (1) if, contrary to the judges analysis, the contract was one
of sale of goods within the 1979 Act, it was such only in relation to bunkers
which remained unconsumed on payment and at the end of the credit period;
and (2) section 49 of the 1979 Act was not exhaustive, and FG Wilson
D (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2014] 1 WLR 2365
had been wrongly decided and was not binding on the court.
At the hearing the court dealt only with questions raised by the owners
appeal.
The facts are stated in the judgment of Moore-Bick LJ.
Stephen Cogley QC, Jeremy Richmond and Liisa Lahti (instructed by

E Ince & Co) for the owners.
Robert Bright QC, Marcus Mander and Clara Benn (instructed by Allen
& Overy LLP) for the rst supplier and the bank.
The court took time for consideration.
22 October 2015. The following judgments were handed down.

F
MOORE-BICK LJ
1 On 4 November 2014 the rst respondent, OW Bunker Malta Ltd
(OWBM) supplied 1,000 metric tons of fuel oil and 100 metric tons of
gasoil (the bunkers) to the vessel Res Cogitans at Tuapse pursuant to a
contract which incorporated its standard terms of business. Those terms
G provided for payment 60 days after delivery and included a retention of title
clause under which property was not to pass to the vessels owners or
managers until the bunkers had been paid for in full. Despite that, however,
the contract also expressly provided that from the moment of delivery the
vessel was entitled to use the bunkers for the purposes of propulsion.
2 OWBM had obtained the bunkers under a contract with the ultimate
parent company of the group, OW Bunker & Trading A/S (OWBAS),
H
which had in turn obtained them from another bunker supplier, Rosneft
Marine (UK) Ltd (RMUK). RMUK had itself obtained the bunkers from
one of its associated companies, RN-Bunker Ltd (RNB), which had
facilities at Tuapse and made the delivery to the vessel. The contract
between OWBAS and RMUK incorporated RMUKs standard terms which
1040
Moore-Bick LJ
provided for payment to be made 30 days after delivery and also included a A
retention of title clause. It did not, however, expressly allow the owners to
use the bunkers for the purposes of the propulsion of the vessel pending
payment.
3 On 6 November 2014 OWBAS announced that it was applying to the
court in Aalborg for restructuring. The commencement of those proceedings
constituted an event of default under a nancing agreement which the group
B
had entered into with the second respondent, ING Bank NV (ING), and as
a result, ING asserted a right to recover as assignee the debt, if any, owed by
the appellants to OWBM in respect of the supply of the bunkers.
4 On 17 November 2014 RMUK, having become aware that it might
not receive payment from OWBAS, asserted that it remained the owner of
the bunkers and indicated that it would seek payment from the appellants,
who are the owners and managers respectively of the vessel. (Since their C
positions are the same as far as the present proceedings are concerned, I shall
refer to them together simply as the owners.) The owners have paid
neither OWBM nor RMUK. Part of the bunkers supplied to the vessel at
Tuapse had been consumed in the propulsion of the vessel by the time the 30-
day period of credit allowed under RMUKs terms expired and the whole of
them had been consumed for that purpose by the time the 60-day period of
D
credit allowed under OWBMs terms expired.
5 In early December 2014 the owners began arbitration proceedings
against OWBM and ING seeking a declaration that they were not bound to
pay either of them for the bunkers supplied to the vessel at Tuapse, or, in the
alternative, damages for breach of contract, on the grounds that OWBM had
been unable to pass title in the bunkers to them. In the event, the tribunal
agreed to determine as preliminary issues a number of questions formulated E
by the parties. They included the following: (i) whether OWBM had
property in the bunkers at any material time (issue 1); (ii) whether the
retention of title clause in OWBMs terms prevented property in the bunkers
from passing to the owners (issue 3); (iii) whether OWBM could recover the
price of the bunkers under section 49(1) of the Sale of Goods Act 1979 (issue
4); (iv) whether OWBM had any other claim under the contract (issue 6(a));
F
(v) whether the Sale of Goods Act 1979 applied to the contract between
OWBM and the owners (issue 9).
6 By an interim award published on 16 April 2015 the arbitrators
determined all but one of the preliminary issues. They held that the eect of
OWBMs terms, in particular the combination of the retention of title clause
and the clause giving the owners the right to use the bunkers for the
propulsion of the vessel in advance of payment, was that it did not undertake G
to transfer property in the bunkers to them and that therefore the contract
was not one for the sale of goods within the meaning of the 1979 Act. As a
result, OWBM could not recover the price of the goods under section 49 of
the Act, but was entitled to recover the sum due as a simple debt.
7 The owners appealed by agreement of the other parties to the
proceedings in relation to ve questions of law which in one form or another
H
raised the question whether the contract between themselves and OWBM
was a contract for the sale of goods, and therefore subject to the 1979 Act,
and if not, whether it was an implied term of the contract that OWBM
would be able to pass title in the bunkers to them at the time when they were
delivered or consumed.
1041
Moore-Bick LJ
A 8 OWBM and ING also appealed by agreement in relation to a number

of questions of law, on which they sought to rely as providing an alternative
basis for upholding the arbitrators conclusion that they were entitled to
recover payment from the owners. Since they share the same position in
relation to the present appeal, it is convenient to refer to them both simply as
OWBM.
9 The matter thus came before Males J, who armed the arbitrators
B
decision. He rejected the owners argument that the contract was one for the
sale of goods, holding that it was necessary to look behind the language of
the contract to ascertain exactly what the parties had undertaken to do. He
held that OWBM had not undertaken to transfer property in the bunkers
delivered to the vessel because both parties had specically envisaged that
some, if not all of them, were likely to have been consumed in the vessels
C engines before the time for payment had come. When that happened they
ceased to exist and it became impossible to transfer property in them. He
analysed the position as follows [2015] 2 Lloyds Rep 563, para 46:
In these circumstances the question arises, as already mentioned,
what was the consideration for the money payment which the owners
agreed to make if it was not the transfer of title? In my judgment the true
D nature of the parties bargain was that OWBM would deliver or arrange
for delivery of the bunkers, which the owners would be immediately
entitled to use for the propulsion of the vessel.
10 In para 55 of his judgment he expressly approved the arbitrators
reasoning in para 51 of the award where they had said:
Stripped of all unnecessary detail, the deal between the parties was
E
that OWBM would ensure delivery of the bunkers, the use of which
would be immediately available to the owners, who would pay for them
according to OWBMs invoice.
Such an agreement does quite obviously resemble in some respects a
contract of sale, but its terms and their performance do not to any extent
rely on property or title or their transfer.
F
11 In the light of his decision on the central issue concerning the nature
of the contract the judge found it unnecessary to determine the other
questions raised by OWBM. He gave the owners permission to appeal in
relation to the questions raised by their appeal, but refused OWBM
permission to appeal in relation to the questions raised by its appeal. In
substance, therefore, the judge restricted the appeal to this court to the
G question whether the contract between the owners and OWBM was a
contract for the sale of goods within the meaning of section 2 of the 1979
Act and whether OWBM could sue for the price under section 49(1).
12 Shortly before the hearing of the appeal OWBM led a respondents
notice seeking to uphold the judges decision on a number of additional or
dierent grounds. The owners argued that, having been refused permission
to appeal in relation to the issues raised by its own appeal, OWBM was not
H
entitled to raise the same points by way of a respondents notice. We
declined to resolve that question, because by the time the matter came on for
hearing it had already become clear that there would not be time to hear
argument on the wide range of issues that OWBM wished to pursue. At the
outset of the hearing, therefore, we indicated that we would hear argument
1042
Moore-Bick LJ
only on the question whether OWBM was bound to transfer title in the A
contract goods and would give our decision on that question before deciding
on what, if any, further questions it would be appropriate to hear argument.
Accordingly, this judgment deals only with the questions raised by the
owners appeal. The parties will have an opportunity in due course to make
submissions about the future conduct of the appeal.
13 Before turning to consider the parties submissions on the central B
question before us it may be helpful to refer in a little more detail to the
commercial background and to the salient features of OWBMs standard
terms. For the purposes of their interim award the arbitrators were asked to
assume the existence of a number of facts. They included the following:
6. It is well known in the industry . . . that many bunker suppliers sell
on terms including retention of title clauses along the supply chain . . . C
7. It is well known by shipowners and charterers that suppliers of
bunkers are frequently sub-sellers, and that the terms on which bunkers
are sold frequently include retention of title clauses . . .
18. RMUK was aware that the OWB [terms and conditions] would
include or were likely to include both a retention of title clause and an
express provision that, prior to payment, owners would be in possession
of the bunkers as bailee[s] and would not be entitled to consume them D
other than for the propulsion of the vessel.
19. RMUK was aware that OWB Malta was supplying the bunkers to
the vessel for consumption.
20. RMUK was aware that the bunkers might be being purchased for
immediate use and might accordingly be wholly or partly consumed
during the period of 30 days credit which RMUK had granted to E
OWBAS. Such consumption might also occur before the expiry of any
contractual credit period agreed between owners and (the relevant) OWB
company. This happened in respect of the present stem the subject matter
of this arbitration.
14 The standard terms and conditions of the OW Bunker group, on
which OWBM contracted with the owners in this case, are described as F
terms and conditions of sale for marine bunkers and are couched in
language redolent of a contract for the sale of goods. In particular, the
parties are described as seller and buyer respectively and there are
references to sale and purchase. The important terms for the purposes
of this appeal are contained in section H which deals with title. It includes
the following provisions:
G
H Title
H1. 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 . . .
H2. Until full payment of the full amount due to the seller has been
H
made . . . 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.
1043
Moore-Bick LJ
A The nature of the contract

15 Mr Cogley QC, whose submissions were supported by written
submissions served by RMUK pursuant to the order of Vos LJ, submitted
that the language used by the parties to express their agreement made it clear
that they intended the contract to be one for the sale of goods and their
relationship to be that of buyer and seller. It followed that they intended
B the contract to be governed by the 1979 Act. The contract should be
understood, he submitted, as an agreement to sell under which property was
to pass to the owners at a future date, in this case on payment. The fact that
by that time the goods might have ceased to exist (and had in fact done so)
did not matter, because the eect of the contract was that property passed
retrospectively and was to be treated as having been in the owners from the
date of delivery. It followed, he said, that OWBM could recover the price of
C the goods only if it had transferred property in them to the owners, but since
it never did obtain property in the bunkers (because it did not pay RMUK), it
could not transfer it to the owners. It was therefore unable to recover the
price.
16 Mr Bright QC submitted that the judges analysis, and that of the
arbitrators, was correct. It is quite natural, he submitted, for commercial
D parties to describe a contract of this kind as one of sale, since it involves the
delivery of goods to the owners for their immediate use in return for
payment at a future date of a specied sum of money. However, neither
party envisaged property in the goods to which the contract related (or at
any rate the majority of them) would be transferred to the owners, because
they assumed that some or all of them would or might have been consumed,
and would therefore have ceased to exist, by the time payment fell due.
E 17 I accept that the language of OWBMs standard terms, reected in
the order conrmation and invoice, suggests that the parties were thinking in
terms of a sale and purchase of the bunkers that were to be supplied under
the contract, but I agree with the judge that in order to decide whether the
owners have been relieved of any liability to pay the agreed sum to OWBM it
is necessary to identify carefully the obligations which the parties have
F
undertaken. Mr Cogley set out to establish that the 1979 Act applied to this
contract and from there to argue that OWBM could not recover the sum
alleged to be due because it had not transferred property in the goods to the
owners. In my view, however, that is to approach the question from the
wrong end. The rst question is What have the parties undertaken to do?
If one party has agreed to transfer property in goods to another in return for
a money payment, the contract will be one for the sale of goods and the
G incidents described in the 1979 Act will apply to it. One of those is that the
contract will be subject to an implied condition that the seller has a right to
sell the goods or will have such a right at the time when property is to pass:
section 12(1). An inability to transfer property at the agreed time amounts
to a breach of condition and a total failure of consideration. As a result the
seller cannot recover the price, or, if he has already received payment, the
buyer may recover it: see Rowland v Divall [1923] 2 KB 500, to which
H
the judge referred. If, however, the transfer of property is not of the essence
of the contract, it is necessary to ask oneself, as the judge did, what was the
essential benet for which the owners agreed to pay.
18 Mr Cogleys submission that the owners had contracted for the
transfer of title to the bunkers and that the contract was therefore an
1044
Moore-Bick LJ
agreement to sell within the meaning of section 2(1) of the 1979 Act derived A
its force almost entirely from the descriptive language used in OWBs
standard terms, but it paid little heed to their detailed provisions, in
particular those of section H. In support of his argument Mr Cogley drew
our attention to the recent decision in Arnold v Britton [2015] AC 1619, in
which the Supreme Court cautioned against making too free a use of
business common sense and commercial context in order to give to a
B
contract a meaning that its language cannot properly bear. I entirely accept
that it is no part of the courts function in the guise of interpretation to
remake the parties contract in a way that seems to improve its operation or
mitigate unfortunate consequences for one or other party. However, that is
not what the court is being invited to do in this case. The question is simply
whether the characterisation by the parties of the contract as one of sale
adequately reects the substance of the obligations to which it gives rise. C
Just as it is no part of the courts function to remake the parties contract in
the guise of interpretation, so it is no part of the courts function to shoehorn
their contract into a category to which it does not properly belong in order to
impose on them consequences which they did not intend. I agree with the
judge, therefore, that, however the parties have described the transaction, it
is necessary to ascertain what each of them has actually undertaken to do.
D
19 Mr Cogley sought to support his analysis by reference to the position
that would exist if instead of 60 days the period of credit had been 5 days. In
such a case, he argued, only a small proportion, if any, of the bunkers could
be expected to have been consumed before the time for payment arrived and
so the contract would obviously be an agreement to sell with property to
pass on payment. In my view this example is apt to mislead, mainly because
it confuses an agreement to sell the whole contract quantity with an E
agreement to sell only part. Whenever the contract provides that property is
to pass on payment and that anything more than a minimal part of the goods
may be consumed before payment is due, the parties necessarily contemplate
that part of the goods may not exist at that time. In truth, therefore, it is not
an agreement to sell the nominal contract quantity, but an agreement to
sell whatever remains at the time of payment. It may be that in some
F
circumstances, for example, where the parties contemplate that the
overwhelming majority of the goods will continue to exist at the date when
property is to pass, that the ability to transfer property in the remainder will
be of fundamental importance and an inability to do so will amount to a
total failure of consideration or a breach which goes to the root of the
contract, but that is not this case. In some circumstances, therefore, the
commercial context may be of importance in deciding what the parties have G
undertaken to do, but in the present case I do not think it necessary to look
far beyond the terms of the contract themselves, although the commercial
context as set out in the assumed facts supports the conclusion to which, in
my view, the terms of the contract themselves point.
20 The critical terms, in my view, are to be found in the agreement for
60 days credit and in clauses H1 and H2, which provide that property in the
H
bunkers is not to pass until they have been paid for in full but that the owners
have the right to use them for the propulsion of the vessel from the moment
of delivery. In so far as the commercial context has any bearing on the
interpretation of these provisions, it is to be found in the fact that the parties
contemplated that a large part, if not all, of the bunkers would or might be
1045
Moore-Bick LJ
A consumed within 60 days of delivery and as a result would cease to exist. As

I have pointed out, the extended period of credit for which the contract
provided made it more than usually likely that the majority of the bunkers
would have been consumed by the time payment became due.
21 The judge identied the essential constituents of the contract as
follows [2015] 2 Lloyds Rep 563, para 42:
B . . . the combined eect of (1) the retention of title clause, (2) the
period of credit before payment fell due, (3) the permission given to the
owners to consume the bunkers, and (4) the fact that some or all of
the bunkers supplied were likely to be consumed before the expiry of the
credit period with the consequence that property therein would cease to
exist, means that the parties must be taken to have understood that it was
likely that title would never be transferred to the owners. It was possible
C
that it would be, but not likely. It was certainly not an essential part of the
transaction that it should be. As Atkin LJ said in the well known case of
Rowland v Divall [1923] 2 KB 500, the whole object of a sale is to
transfer property from one person to another. In the present case,
however, the combination of features listed above means that it cannot
have been the object of the contract to transfer property from OWBM to
D the owners: both parties knew that this was unlikely ever to happen. Even
if it did, because some bunkers remained unconsumed after 60 days, that
was not fundamental to the transaction.
22 He continued, at para 43: It stands to reason that what the owners
were paying for was not a title which they were never going to get but
something else.
E 23 The judge then turned to consider what the owners had agreed to
pay for and said, at para 46:
In my judgment the true nature of the parties bargain was that
OWBM would deliver or arrange for delivery of the bunkers, which the
owners would be immediately entitled to use for the propulsion of the
vessel.
F
24 In an attempt to rebut that analysis Mr Cogley drew our attention to
the decision in Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch
25, in which the plainti 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 had been paid for, as indeed occurred. He
G pointed out that all those involved in that case treated the contract as one for
the sale of goods and therefore as governed by the 1979 Act. That may be
true, and it is right to acknowledge that at p 35DE Bridge LJ described the
contract as essentially one of sale and purchase, subject only to the
reservation of title clause, whatever its eect may have been. However, he
did so in the course of rejecting the sellers argument that the contract was
simply one of bailment: ibid. The issue before the court was not the same as
H
that which arises in this case; the only question for decision was whether the
supplier had obtained title to the chipboard into which the resin had been
incorporated. The court held that it had not. It would have been surprising,
however, if the seller had not been entitled to recover the amount due under
the contract and there is nothing in the decision which suggests that it was
1046
Moore-Bick LJ
unable to do so. That question simply did not arise. I do not consider, A
therefore, that the case supports Mr Cogleys submission. The decision is
important for another reason, however. As Bridge LJ made clear, the resin
ceased to exist when it was incorporated into the new product and property
in it ceased to exist at the same time, because it is not possible to own
something that does not exist: see p 35G. That has serious implications for
Mr Cogleys submission that property in the whole of the bunkers passed to B
the owners at the time of payment, despite their prior consumption.
25 Mr Cogley also referred to other decisions involving retention of title
clauses, in particular, Clough Mill Ltd v Martin [1985] 1 WLR 111, Armour
v Thyssen Edelstahlwerke AG 1986 SLT 452; 1989 SLT 182; [1991] 2 AC
339 and Chaigley Farms Ltd v Crawford, Kaye & Grayshire Ltd [1996]
BCC 957. He submitted that in each of those cases the courts had treated the
contract as one for the sale of goods, despite the existence of a retention of C
title clause and the parties knowledge that the goods would or might be
consumed before payment had been made.
26 In Clough Mill Ltd v Martin [1985] 1 WLR 111 the plainti supplied
a quantity of yarn to a company called Heatherdale Fabrics Ltd on terms
that the goods were to remain its property until paid for in full, although
Heatherdale was granted the power to sell the goods or use them for the D
purpose of manufacturing products. The contract also provided that if any
payment were overdue the plainti could recover or resell the goods and
enter Heatherdales premises for that purpose. When the defendant was
appointed receiver of Heatherdale the plainti informed him that it wished
to repossess the unused yarn and asked to be allowed to collect it. The
defendant refused on the grounds that the retention of title clause amounted
E
to a charge to secure payment and was void for non-registration. On appeal,
this court (Sir John Donaldson MR, Oliver and Robert Go LJJ) held that
property in the yarn had not passed to Heatherdale, which could not
therefore have created a charge in favour of the plainti. Robert Go LJ,
and to a lesser extent Oliver LJ, assumed that the contract under which the
yarn had been supplied was a contract for the sale of goods to which the
1979 Act applied. It was not necessary, however, for the court to consider F
questions of the kind that arise in this case. In particular, the court did not
have to consider an argument that the company was not liable to pay for the
goods it had consumed.
27 In Armour v Thyssen Edelstahlwerke AG the defendant supplied
steel to a manufacturing company under a contract which contained a
retention of title clause. The contract was governed by German law. The G
plaintis, who had been appointed as receivers, brought proceedings against
the supplier seeking a declaration that property in the steel had passed to the
company, despite the fact that payment had not been made. The suppliers
argued that the retention of title clause, which was valid under German law,
was eective to prevent title passing, either because the steel in question had
been in Germany when the contract had been entered into so that German
law was the lex situs, or because the passing of title was governed by German H
law as the proper law of the contract. The receivers agreed that the passing
of property was governed by the lex situs, but argued that, once the goods
reached Scotland, Scots law governed the question and that the retention of
title clause was ineective under Scots law. They also argued that cutting the
1047
Moore-Bick LJ
A steel into strips in preparation for use in manufacture had created a new
species of goods, title to which vested in the company.
28 The Lord Ordinary, Lord Mayeld, held 1986 SLT 452 that property
had passed from the supplier to the company, but that in any event the
cutting of the steel into strips in preparation for its use had resulted in the
creation of a new species of goods, title to which vested in the company
which had produced them. The decision was upheld on appeal by the
B
Second Division 1989 SLT 182, although doubts were expressed about the
conclusion that cutting the steel into strips had resulted in the creation of
goods of a dierent nature.
29 In the House of Lords [1991] 2 AC 339 the decision was reversed.
Lord Keith of Kinkel, with whom Lord Griths, Lord Oliver of Aylmerton,
Lord Go of Chieveley and Lord Jauncey of Tullichettle all agreed, referred
C to sections 17 and 19 of the 1979 Act, which concern the time at which
property passes under a contract for the sale of goods, and held that property
passed when the parties agreed that it should pass and therefore not until the
goods had been paid for. When rejecting the proposition that the retention
of title clause made the transaction one in the form of a contract of sale
which was intended to operate by way of security within the meaning of
section 62(4) of the 1979 Act, Lord Keith described the contract as
D
a genuine contract of sale, but he was not addressing the question which
we are required to consider.
30 In the Chaigley Farms case [1996] BCC 957 the plainti supplied live
animals to an abattoir under a contract which contained a retention of title
clause. Both parties contemplated that the animals would or might be
slaughtered before they had been paid for. When receivers were appointed
E over the abattoir the plaintis sought to enforce the retention of title clause
in order to recover the remaining live animals and butchered meat which
they alleged were their property. Garland J held that the clause related only
to live animals and that when they were slaughtered the plaintis title to
them was extinguished.
31 These authorities certainly tend to support Mr Cogleys submission
that the courts have consistently regarded a contract for the sale of goods
F
which contains a retention of title clause as a contract of sale falling within
the scope of the 1979 Act, even in cases where the buyer is given a licence to
use or dispose of the goods before he has paid for them. However, as the
judge pointed out, in none of those cases was the court concerned with the
question whether the contract provided for property to pass retrospectively
at a time when the goods or part of them had ceased to exist. The judge
G regarded Armour v Thyssen [1991] 2 AC 339 as authority for the
proposition that a contract of sale containing a retention of title clause can
fall within the 1979 Act, but he noted that it was not a case in which the
goods had been or were likely to be consumed in a manufacturing process
before payment fell due and did not consider that it determined the issue he
had to decide. Mr Cogley submitted that he ought to have regarded the
decision as binding authority for the proposition that a contract of this kind
H
is always to be regarded as an agreement to sell the whole of the contract
quantity, with the consequence that unless the seller is able to transfer
property in the goods he cannot recover the price.
32 In the light of these authorities Mr Cogley submitted that the
contract in the present case was properly to be understood as an agreement
1048
Moore-Bick LJ
to sell the full contract quantity of bunkers on terms that property was to A
pass on payment, even if they had been consumed in whole or in part by the
time payment fell due. The diculty with that submission, however, is that
in a case such as the present it is no longer possible to transfer property in
goods once they have ceased to exist: see Bordens case [1981] Ch 25; and
even if the goods have been only partly consumed, it is not possible to
transfer title in the whole of the goods covered by the contract. Another B
approach might be to treat the contract as one for the sale of all the goods
with the risk of loss passing to the buyer at the time of delivery, but that does
not assist Mr Cogley either. The consumption of the goods in a manner
contemplated by the contract cannot properly be regarded as loss due to the
occurrence of a risk and in any event the seller can still pass property only in
those goods which remain in existence at the time of payment. Mr Cogley
sought to answer that objection by submitting that, on payment in full, title C
passed retrospectively from OWBM to the owners, alternatively that
OWBM became estopped from denying that property in the bunkers had
been vested in the owners at the time when they were consumed. In my view
that is an articial analysis which reects neither the terms of the contract
nor commercial reality.
33 On this point also I agree with the judge. Whatever label one D
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
E
in commercial terms can properly be described as the price. That may not
satisfy the denition 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 diculties in the present case stem entirely from the owners
attempt to establish that the consideration for the payment of the price was F
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 G
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 H
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
1049
Moore-Bick LJ
A 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.
B
Implied term
35 The judge held that as a matter of necessary implication the contract
imposed on OWBM an obligation to ensure that the licence which it gave the
owners to use the bunkers immediately upon delivery was or became binding
on whichever entity in the supply chain was or would become the owner of
C
the goods. Mr Cogley submitted, however, that an implied term to that
eect was unworkable. He argued that if the contract could not be brought
within the 1979 Act, the judge ought to have held that it was subject to an
implied term that OWBM had performed all the obligations arising under its
contract with its own supplier.
36 I have to say that I had some diculty in understanding the precise
D content of the implied term for which Mr Cogley contended. In the grounds
of appeal it is said that the judge ought to have held that the contract was
subject to an implied term equivalent to that contained in section 12(1) of
the 1979 Act, but that imposes on the seller an obligation to ensure that he
has a right to sell the goods at the time when property is to pass. It does not
help one to identify when or in respect of what goods that is intended to
occur. At one point in the course of argument in response to a question from
E
the bench Mr Cogley said that it was an implied term, based on the retention
of title clause, that at the time of delivery of the bunkers OWBM had paid for
them and that title to the goods had passed to it. However, that is plainly not
what the parties contemplated, since it is common knowledge in the industry
that bunkers are normally sold on 30 days credit and no one would have
expected OWBM to pay its own supplier on or before delivery. Later, when
F asked to repeat his submission, Mr Cogley said that it was an implied
condition of the contract that OWBM would comply with its obligations to
the party above it in the chain (in this case OWBAS), in particular by paying
for the goods on expiry of the relevant period of credit. In my view there is
no need to imply a term of that kind, which does not accurately reect the
essential nature of the contract. Under a contract of this kind the owners
G
bargain for the right to consume the goods before property has passed to
them and if they obtain an eective licence to do so binding on the various
parties in the supply chain, an implied condition of the kind postulated by
Mr Cogley is both unnecessary and inappropriate.
Owners liability to pay for the bunkers

37 As the judge pointed out [2015] 2 Lloyds Rep 563, para 49, the
H
arbitrators held that the transfer of property in the bunkers was not
fundamental to the parties contract and that the 1979 Act therefore did not
apply. They also held that OWBM had a claim under the contract to recover
the price of the goods (issue 6) and that on the basis of the assumed facts
OWBM did not appear to be in breach of any implied term, whether
1050
Moore-Bick LJ
analogous to that contained in section 12 of the 1979 Act or otherwise (issue A

13). In substance (although they did not express themselves in quite this
way), the arbitrators held that the owners had got substantially what they
had agreed to pay for and that they had failed to identify any breach of
contract on the part of OWBM. On the face of it, therefore, it would seem
that in the arbitrators view the owners were liable to pay for the bunkers. It
may be that that was assumed to be a necessary consequence of deciding the B
preliminary issues as they did, but the owners liability to pay was not
formally one of the issues for decision and it may be that other matters have
been raised in the arbitration which have a bearing on that question.
38 In those circumstances I think the judge was wrong, strictly
speaking, to hold that it was necessary for him to decide whether on the
assumed facts OWBM had succeeded in obtaining the permission of RMUK
for the owners to consume the bunkers, (or, as I would prefer to put it, C
whether OWBM eectively authorised the owners to consume the bunkers
so as to bind RMUK and any other suppliers in the chain). The owners case
before the arbitrators was that they were not liable to pay OWBM because
the contract was one for the sale of goods and property in the goods had not
passed to them. They do not appear to have advanced the alternative
argument that, if the nature of the contract was that for which OWBM D
contended, they were not liable to pay because they had not been authorised
to consume the bunkers in a manner which bound RMUK and other
suppliers in the chain. Whether they should be allowed to do so at this stage
is probably a matter that ought to have been left to the arbitrators.
39 In the event, however, having formed the view that it was necessary
for him to decide the question, the judge held that RMUK was bound by the E
licence to use the bunkers for the propulsion of the vessel given to the owners
by OWBM in its standard terms. The owners did not seek to challenge that
aspect of the judges judgment; their grounds of appeal and skeleton
argument were directed entirely to the issues surrounding the construction
of the contract between themselves and OWBM.
40 The submissions led by RMUK, on the other hand, were directed
primarily to the question whether it was bound by the licence to consume the F
bunkers pending payment contained in clause H2. RMUKs position in
these proceedings, in which it is described as an interested party, is not
entirely clear and may have to be considered on another occasion. It is
enough for present purposes, however, to say that, although Mr Bright
touched on this aspect of the case and identied the propositions on which
he would rely, we did not hear Mr Cogley on this question and I therefore G
prefer to express no view on it.
41 For these reasons I would dismiss the appeal to the extent of holding
that the failure of OWBM to transfer title in the bunkers does not release the
owners from their obligation to pay for them. If Longmore and
McCombe LJJ are in agreement, I would invite submissions from counsel
about the appropriate way in which to give eect to our decision.
H
LONGMORE LJ
42 I agree with Moore-Bick LJs judgment.
43 I only add that section 2(1) of the Sale of Goods Act 1979 to which
Moore-Bick LJ refers in para 33 of his judgment provides:
1051
Longmore LJ
A 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.
Section 49(1) relates to an action for the price and provides:
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
B
according to the terms of the contract, the seller may maintain an action
against him for the price of the goods.
These subsections complement one another by providing that the Act applies
to a contract to transfer property in goods and that an action for the price is
maintainable once property is transferred.
C
44 That does not mean that there cannot be comparable agreements
which may, as Moore-Bick LJ says in the same paragraph, be described in
commercial terms as contracts for the sale of goods but are contracts to
which the 1979 Act does not apply. The delivery of bunkers with a licence to
consume them is just such a contract. Once the bunkers were delivered, the
owners incurred an obligation to pay and were not released from that
obligation by the fact that OWBM were unable to (and did not) transfer title
D before they were consumed.
MCCOMBE LJ
45 I agree with both judgments.
Appeal dismissed with costs.

Permission to appeal refused.
E
11 February 2016. The Supreme Court (Lord Neuberger of
Abbotsbury PSC, Lord Clarke of Stone-cum-Ebony and Lord Hodge JJSC)
allowed an application by the owners for permission to appeal.
SUSAN DENNY, Barrister

F APPEAL
The owners appealed. The issues for the Supreme Court, as set out in the
parties statement of agreed facts and issues, were (1) whether the contract was
a contract of sale within section 2(1) of the 1979 Act; (2) if not, whether it was
an implied condition of the contract that the rst supplier would perform its
obligations to its supplier, in particular by paying for the goods timeously;
G (3) if the answer to either issue was yes, whether any of the answers given by
the arbitral tribunal should be varied; (4) whether the rst supplier and the
bank were permitted to advance the argument that section 49 of the 1979 Act
was neither a mandatory nor exhaustive section and that, in the
circumstances, a claim for the price lay under the contract whether or not the
requirements of section 49 were satised and that, in so far as FG Wilson
(Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2014] 1 WLR 2365
H
decided otherwise, that case had been wrongly decided; and (5) if they were,
whether or to what extent the order of the Court of Appeal should be upheld on
the grounds that that argument was correct and/or whether any of the answers
given by the arbitral tribunal in its interim award should be conrmed.
The facts are stated in the judgment of Lord Mance JSC.
1052
(SC(E)) [2016] AC
Argument
Jonathan Crow QC, Stephen Cogley QC, Julian Kenny QC and Liisa A
Lahti (instructed by Ince & Co) for the owners.
Whether any contract constitutes a contract of sale for the purposes of
section 2(1) of the Sale of Goods Act 1979 is a matter of substance not form:
see Stoneleigh Finance Ltd v Phillips [1965] 2 QB 537. It depends upon the
terms of the parties bargain. It must be determined once and for all as at the
date of the contract. A contract cannot fall in and out of the Act, depending B
on events occurring subsequently. The issue must be answered by reference
to the statutory test set out in section 2(1), which has three components:
(1) an agreement to transfer property in a thing; (2) the thing constitutes
goods; and (3) the buyer agrees to pay a money consideration. The only
issue in dispute is whether the rst supplier agreed to transfer property in the
bunkers. The agreement to transfer property in the bunkers was both
express and implicit in the rst suppliers terms. The retention of title and C
liberty to consume clauses had two eects: (1) the time of the agreed transfer
of property was deferred until full payment had been made; and (2) the
owners were given a liberty to consume in the meantime, which might result
in the destruction of some of the bunkers before the agreed transfer of
property could take place. As a consequence, the transfer of property
became conditional on the bunkers remaining unburned when payment was
D
made. However, those terms did not take the contract outside the Act: see
section 2(3)(5). Numerous cases have been decided in relation to retention
of title clauses without it ever having been suggested that the inclusion of
such a provision can have any eect on the classication of the agreement as
a sale of goods: see, for example, Armour v Thyssen Edelstahlwerke AG
[1991] 2 AC 339 and Borden (UK) Ltd v Scottish Timber Products Ltd
[1981] Ch 25. Thus the contract plainly was an agreement under which the E
rst supplier agreed to transfer the property in the bunkers to the owners
within section 2(1), even if, as a result of the credit period and the retention
of title clause, the transfer was to take place at a future time or subject to
some condition later to be fullled within section 2(5). [Reference was made
to Clough Mill Ltd v Martin [1985] 1 WLR 111; Forsythe International
(UK) Ltd v Silver Shipping Co Ltd (The Seatta) [1994] 1 WLR 1334 and
F
Angara Maritime Ltd v Oceanconnect UK Ltd (No 2) [2011] 1 Lloyds Rep
61.]
The courts below erred in taking a dierent view based on (i) the
signicance they attributed to the parties supposed expectations as to what
would happen after delivery, and (ii) the eect they allowed those supposed
expectations to have on the proper classication of the contract. That
reasoning relies on the supposed expectations of the parties as to future G
conduct, rather than on the terms of the contract, to determine the
application of the Act, which is wrong in principle, in as much as it fails to
apply the terms of section 2. Further, it engages the court in an exercise of
trying to identify the essential subject matter of the contract, which again is
not an exercise mandated or permitted by section 2. Section 2 asks only
whether the contract is an agreement to transfer property, conditional or
H
otherwise. By those two errors the courts below have succeeded in turning a
subordinate provision in the contracta proviso to an ancillary
clauseinto a provision expressive of the essential subject matter of the
contract. Although there was a possibility, even a likelihood, that some or
all of the bunkers would be consumed before payment was made, that
1053
(SC(E))
Argument
A possibility, whatever the likelihood of its arising, cannot aect the answer to
the question of classication under the Act. The question of classication
posed by section 2 is directed towards the content of the agreement, not
towards an extra-contractual, factual inquiry into the parties expectations
as to (i) when an obligation under the contract would be performed (i e when
payment would be made), or (ii) whether a permission granted by the
contractthe liberty to consumewould be exercised, and if so when and
B
to what extent. The required approach is consistent with sensible policy.
First, admitting the relevance of the parties contemplation is predicated on
the assumption that each party would have some informed expectations in
each case, which may be an entirely unfounded assumption. Second,
admitting the relevance of the parties contemplation is also predicated on
the assumption they shared a common expectation, but they might not.
C Third, even if the parties shared a common expectation, the court would
then have to decide how that expectation aected the issue of classication.
Fourth, even assuming (i) the parties shared a common expectation and
(ii) the court was able to translate that into an answer to the question
whether the Act applied to their bargain, there could be two contracts, on
precisely the same terms, one of which would be governed by the Act, but
not the otherthe only dierentiating factor would be the parties diering
D
expectations about what would or might happen after the contract was
made. That cannot be the right approach to a question of statutory
classication. There is no possible basis for suggesting that Parliament
intended the application of the Act to be so unpredictable. The whole
purpose of a statutory denition is to deliver certainty, not to provide a
platform for disputes. Alternatively, if it is legitimate to look for the essence
E of the contract by reference to the parties expectations, the Court of Appeal
was wrong to characterise the contract by saying that, in essence, what the
parties contracted for was the delivery of a quantity of bunkers which they
had an immediate right to use. On the contrary, the parties contracted for
the transfer of property in the whole quantity of bunkers and that agreement
was the essence of their agreement. Any credit terms which could have the
eect of reducing, even to zero, the quantity of bunkers actually sold were
F
ancillary matters, introduced for the rst suppliers benet but not intended
to aect the fundamental character of the contract.
The Court of Appeal was wrong to hold that the contract was a composite
contract, and that the 1979 Act applied to it only to the extent of applying to
the sale of any bunkers which had not been consumed at the time of
payment. In eect the Court of Appeals analysis was that there was
G (1) a contract for licensed consumption in respect of any bunkers consumed
prior to the date of payment, which was outside the Act; and (2) a contract
of sale in respect of any subsisting bunkers, which was within it. However,
the contract as a whole was a contract of sale within the Act. Unless the
contract can be severed and treated as two separate contracts, there is no
principled basis for treating the contract as a hybrid, partly in and partly out
of the Act. First, there is no basis for that approach in the wording of the
H
legislation. The Act makes no provision for its partial application to some
elements of a contract and not others. Either a contract in relation to goods
falls within section 2 or it does not. Second, there is no basis for it in the
express words of the contract. The contract expressly refers to selling the
goods. Accordingly, the hybridisation of the contract is a matter of
1054
(SC(E)) [2016] AC
Argument
implication but the implication is unjustied as it is neither obvious nor A

necessary. Third, it has the eect that the mutual rights and obligations of
the parties and the application of the Act are only determined in the course
of performance of the contract, depending on post-contractual events, such
as whether there had been consumption or not, and if so to what extent.
Fourth, even in a case where the goods were delivered and consumed or
partly consumed, the hybrid contract approach would leave the sellerand B
very often the buyerunable to determine whether the Act applied or to
what extent it applied. The contract was not severable. First, under the
terms of the contract, there was only one consideration payable by the
buyers, which was the price. Second, that price was not severable: it was a
single gure, expressed as a rate per tonne delivered, which cannot be
divided into a licence fee and a purchase price. Third, the price cannot be
divided by an after-the-event apportionment, even assuming that were a C
legitimate way to eect severance. Generally nobody knows how many
tonnes of a bunker stem have been consumed at any particular date,
especially if the bunkers have been mixed with other bunkers, as the rst
suppliers terms contemplated might happen. Further, two bunker traders in
a supply chain, neither of whom was the shipowner, would be completely
unable to make that apportionment. The purpose of the Act was to enact a D
code which delivers certainty. It is antithetical to that statutory purpose to
interpret section 2 in such a way that (i) the Act applies contingently,
depending on events occurring after its formation, (ii) it applies to some but
not all goods under a single contract, and (iii) the extent of its application
will be unknown to one or other party to the contract, or at least extremely
dicult to ascertain. Alternatively, if the Act does not apply, the court
should hold that it was an implied condition of the contract that the rst E
supplier would perform its obligations to its supplieri e payment
timeously, including its obligation to pay the price. That is a term which is
both obvious and necessary in circumstances where the Act does not apply
to protect the owners from the claims that might be made against it by the
owners of the bunkers that the rst supplier has supplied.
Robert Bright QC, Marcus Mander and Clara Benn (instructed by Allen F
& Overy LLP) for the rst supplier and the bank.
The normal and proper purpose of contract law is to identify the mutual
intentions of the parties to a contract and give eect to those intentions, as
long as they are lawful. The mutual intention of these parties was that the
owners should pay the rst supplier for the bunkers: that is what the express
terms of the contract say. The physical performance promised by the rst G
supplier consisted of the delivery of bunkers of the required quality and
quantity to the vessel within the required delivery period. Since the owners
wanted the bunkers in order to use them, upon delivery the owners were
intended to have and the rst supplier promised to confer the right to use the
bunkers. Both parties were aware when contracting that it was likely that
the bunkers would not be owned by the rst supplier at the time of delivery
H
but by a third party physical supplier, from whom the rst supplier would be
purchasing (whether directly or indirectly) on terms including a credit period
and a retention of title clause. A customers right to use the bunkers is not
commercially eective unless the owners can rely on it not merely as against
the rst supplier but also as against the owner of the bunkers, so as to defeat
1055
(SC(E))
Argument
A a claim in conversion. This requires the rst supplier to ensure that consent
for the bunkers being used by the vessel was a feature of the terms agreed by
the relevant third party supplier. However, such consent is not dicult to
obtain, precisely because everyone in the relevant chain will be aware that
(i) the bunkers are being delivered to a vessel which expects to be able to use
them and (ii) the terms on which they are supplied will not prohibit the
vessels use of the bunkers. Accordingly, the rst supplier must be taken to
B
have given good performance of the promise to confer the right to use the
bunkers in accordance with the contract. It never became obliged to transfer
property in any of the bunkers because the owners did not pay for them and
because, by the time the owners obligation to pay arose, all of the bunkers
had been consumed, so that property in them was extinguished. Thus the
rst supplier rendered good performance under the contract and fully
C discharged its contractual obligations. The owners have received everything
they were entitled to receive from the rst supplier, and the rst supplier has
no further obligations that remain unperformed or undischarged. There has
been no breach of contract at all by the rst supplier, let alone a breach of
condition or a total failure of consideration.
The Sale of Goods Act 1979 does not apply so as to frustrate the parties
intention, because it is inapplicable. The language of the contract is
D
consistent with it being a contract of sale, in the supercial sense that it uses
words such as sale, buyer and seller. However, determining whether
a contract is within the Act or not depends on the substance of the bargain,
not on form or labels. The real substance or object of the contract was the
supply of bunkers of the contractually agreed quantity and quality which the
owners could consume safely and legally. That was what the owners were
E paying for and got. The contract might result in the transfer of property in
some bunkers, but that was not fundamental and was not suciently related
to the price to bring the contract within section 2(1) of the Act. Bunker
supplies often involve a chain of contracts, with several bunker traders
interposed between the physical supplier and the charterers or owners of the
relevant vessel. In standard bunker supplies, and under each of the contracts
in the chain, the parties enter into that contract expecting that payment will
F
be made without there having been any transfer of property. Further, by that
time, it will not be possible for there to be a transfer of property in the
quantity of bunkers that the contract stipulates as its subject matter, because
some or all of that stipulated quantity of bunkers will no longer exist. The
contract in the present case was not a conditional contract within
section 2(3), because the circumstances which would govern whether any
G bunkers remained to be the subject matter of any transfer of property
i e whether and in what quantity bunkers were consumed by the vessel, and
when the owners chose to pay the pricewere within the control of the
owners. To that extent the contract resembles an option rather than a
condition, because the obligations relating to the transfer of property were
not mutually bindingwhich is how, in the event, no such transfer has
occurred and yet neither party is in breach. Rowland v Divall [1923] 2 KB
H
500 can be distinguished as the owners cannot realistically say that the fact
that they did not receive a transfer of title goes to the root of the contract or
is a total failure of consideration or was intended by the parties to constitute
any breach at all, let alone a breach of condition. That the contract is not
one within the Act becomes all the more obvious when other provisions of
1056
(SC(E)) [2016] AC
Argument
the Act are considered, in particular sections 12 and 49, because neither of A
them can sensibly be applied to it. The implied term suggested by the owners
is not necessary, because the contract works perfectly well without it and it
cannot be said to be obvious. Accordingly, the judgment of the Court of
Appeal is right. [Reference was made to Hollis Bros & Co Ltd v White Sea
Timber Trust Ltd [1936] 3 All ER 895.]
In any event, the Court of Appeals order should be upheld on the grounds
B
that section 49 of the Act is neither mandatory nor exhaustive; that, in the
circumstances, a claim for the price lies under the contract whether or not the
requirements of section 49 are satised; and that, in so far as FG Wilson
(Caterpillar) decided otherwise, that case was wrongly decided. If
Caterpillar was wrongly decided, the owners have no defence to the claim
under the contract, even if the Act applies to it. By raising this argument, the C
rst supplier and the bank are not seeking in any way to vary the answers of
the arbitrators or the order of the Court of Appeal. Prima facie, the argument
is one that they are, therefore, entitled to raise: see the Supreme Court Rules
2009 (SI 2009/1603), rule 25 and Supreme Court Practice Direction 8,
paragraph 8.3.1. Alternatively, if permission to raise the point pursuant to
Supreme Court Practice Direction 6, paragraph 6.3.3 is needed on the
D
grounds that it was not argued before the arbitrators or Males J, albeit only
because it could not be, the court should grant such permission. The point is
an important one which is overdue for consideration by the Supreme Court.
In Caterpillar, the principal justication for regarding section 49 of the
1979 Act as mandatory and exclusive was that it was said to state the
position at common law before 1893. However, the general common law
approach is that everything which is not forbidden is allowed, especially in E
the context of contract law where freedom of contract prevails except where
specically limited. With some exceptions, notably illegality, most of the
limits which inhibit freedom of contract derive from statute. Before 1893,
there was ex hypothesi no relevant statute aecting the sale of goods which
limited the parties contractual freedom. It follows that it can only be said
that there would have been no claim for the price before 1893 on the facts of
F
the present case if a decision can be found which pre-dates the 1893 Act and
which establishes that the court will not give eect to an agreement that the
price is payable even though there has been no transfer of property.
Furthermore, it must be either a decision on analogous facts or by reference
to a general principle which would encompass such facts. There is no such
decision. Instead, there are at least three decisions demonstrating that the
courts would and did give eect to an agreement that the price was payable G
even though there had been no transfer of property: see Dunlop v Grote
(1845) 2 Car & K 153; Castle v Playford (1872) LR 7 Ex 98 and Martineau
v Kitching (1872) LR 7 QB 436, none of which was cited to the Court of
Appeal in Caterpillar. Furthermore the general approach of the 19th
century commentators was that the parties to a contract of sale enjoyed
unrestricted freedom of contract. Sir Mackenzie Chalmers, the draftsman of
H
the Act, made it clear that he did not intend the 1893 Act to restrict freedom
of contract: see The Sale of Goods, including the Factors Acts 1889 (1890)
and The Sale of Goods Act 1894, including the Factors Acts 1889 & 1890
(1894), pp iiiiv. In ordinary circumstances the personal views of the
draftsman of a statute might not assist in interpretation. It is dierent where
1057
(SC(E))
Argument
A those views (i) existed in published form before the statute was presented to
Parliament, (ii) were explained to those responsible for scrutinising and
considering the draft statute during its passage through Parliament and
(iii) can be seen to have prevailed. The decision of the Court of Appeal in
Caterpillar has also provoked academic criticism: see Gullifer, The
interpretation of retention of title clauses: some diculties [2014] LMCLQ
B
564; and Benjamins Sale of Goods, 9th ed (2014), para 16028. [Reference
was also made to Laird v Pim (1841) 7 M & W 474 and Pordage v Cole
(1668) 1 Saund 319l.]
The 1893 Act was intended to summarise, synthesise and set out in an
accessible manner the existing case law as it stood in 1893. In the sense that
it set out all the principles which those cases had established thus far, it was
intended to be a complete statement of the law in 1893. But it was not
C intended to stand as a complete statement of the law for all time. It was
expository rather than exhaustive. It was recognised that the law would
continue to develop, as new forms of contract raised new questions which
would require new answers: see section 55; Christopher Hill Ltd v
Ashington Piggeries Ltd [1972] AC 441, 501 and Harry & Garry Ltd v
Jariwalla (unreported) 16 June 1988; [1988] CA Transcript No 516. The
D 1893 Act did not lay down exhaustive rules, but default rules which would
apply where the parties had not made their intentions express. It was
therefore not intended to limit freedom of contract. A claim for the price
payable under a contract of sale is a particular species of claim in debt.
There is no reason in principle why, in 1893, such a claim would not have
succeeded in reliance on the contract terms, the eect of which is that the
rst suppliers right to payment is not conditional on the transfer of property
E
in the bunkers. Very few of the cases decided since 1893 call that analysis
into question. A number of cases have proceeded on the basis that the seller
had to bring itself within section 49 but that is likely to have been because in
none of those cases had the parties reached any special agreement as to
payment of the price: see Stein Forbes & Co v County Tailoring Co (1916)
115 LT 215 and Muller, Maclean & Co v Leslie & Anderson (1921)
F 8 Ll L Rep 328. The only case in which the judge was clearly of the view that
section 49 is exhaustive is Colley v Overseas Exporters [1921] 3 KB 302 but
the relevant dicta were (i) obiter; (ii) based on the erroneous belief that there
was no action for the price at common law save under the indebitatus
counts; and (iii) inconsistent with Shell-Mex Ltd v Elton Cop Dyeing Co Ltd
(1928) 34 Com Cas 39, 4445. There have been two Court of Appeal
G decisions since 1893 in which the court has either expressly found that
section 49 is not mandatory, or has indicated that it is only mandatory unless
agreed otherwise: see Harry & Garry Ltd v Jariwalla (unreported) 16 June
1988; [1988] CA Transcript No 516 and Otis Vehicle Rentals Ltd v Cicely
Commercials Ltd [2002] EWCA Civ 1064 at [12]. The decision in
Caterpillar does not appear to have been followed in any Commonwealth
jurisdiction and the weight of authority in Australia favours the view that
H the situations in which the price may be claimed are not restricted to those
set out in section 49: see Minister for Supply and Development v
Servicemens Co-operative Joinery Manufacturers Ltd (1951) 82 CLR 621.
[Reference was also made to Plaimar Ltd v Waters Trading Co Ltd (1945) 72
CLR 304 and Demby Hamilton & Co Ltd v Barden [1949] 1 All ER 435.]
1058
(SC(E)) [2016] AC
Argument
Crow QC in reply. A
There is no jurisdiction to hear argument on FG Wilson (Engineering) Ltd
v John Holt & Co (Liverpool) Ltd [2014] 1 WLR 2365 (Caterpillar) in
this appeal or, if there is jurisdiction to hear it, the court should decline to
exercise that jurisdiction. The arbitrators award made a binding
declaration of the parties rights. As part of that award, they held that (i) the
rst supplier never had property in the bunkers, (ii) it never passed property
B
in the bunkers to the owners, and (iii) as a result, section 49 of the 1979 Act
would deprive the rst supplier and the bank of any ability to maintain an
action for the price against the owners (assuming the contract fell within the
Act): that conclusion expressly relied on the decision in Caterpillar.
Appeals lie from arbitrators on points of law by virtue of section 69(1) of the
Arbitration Act 1996. The rst supplier and the bank were accordingly free
to appeal against the arbitrators conclusion based on Caterpillar, but they C
chose not to do so. After the parties appeals had been heard by Males J, the
rst supplier and the bank specically sought permission to appeal to the
Court of Appeal on the Caterpillar point. Males J specically refused
permission to appeal on that point. Accordingly, the Caterpillar point
ended there, because permission to appeal from the High Court to the Court
of Appeal under section 69(8) of the Arbitration Act 1996 can only be
D
granted by the High Court. In the circumstances, it is not open to the rst
supplier and the bank to raise the point now. In any event, even if
Caterpillar was wrongly decided, it would make no dierence to the
outcome in this case. The rst supplier never paid its own supplier and was
never in a position to transfer title and, therefore, it could not sue for the
price outside section 49, even if such a claim is permitted by the Act. Even if
it were in principle possible to contract out of section 49, the rst supplier E
did not do so: there is no express term in the contract entitling it to bring an
action for the price irrespective of whether property in the goods has passed.
The rst supplier and the bank wrongly suggest that, if the Act applies to the
contract, the issue in Caterpillar needs to be resolved in order to achieve
nality as between the parties. However, depending on the answer to the
question whether the Act applies, numerous other issues may also need to be
F
resolved. Resolving the Caterpillar issue does not, therefore, achieve
nality. It is a matter for the Supreme Court to assess whether, having given
permission to appeal in relation to a short point as to the application of the
Act, it is either appropriate or feasible, in the time available, also to hear
argument on a dierent point.
In any event, Caterpillar was correctly decided. The policy of the law is
that it would be wrong to allow a seller both to claim the price and to keep G
the goods. For that reason, as a general rule, under a contract for the sale of
goods the buyers liability to pay the price is treated as conditional on
performance of the sellers promise to transfer property in the goods.
Essentially, the eect of that rule is that, where the seller has not in fact
performed his contract, he is limited to his remedy in damages. Thus
section 49(1) of the Act applies the default rule that the transfer of property
H
is a pre-condition to an action for the price. Section 49(2) provides for a
limited exception to that rule, permitting the seller to sue for the price where
the parties have agreed that payment will be made on a day certain,
irrespective of whether delivery is made. However, even where section 49(2)
applies, the seller must be able to prove that it is ready, willing and able to
1059
(SC(E))
Argument
A perform: see Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002]
EWCA Civ 1064 at [16]. The question whether section 49 is mandatory has
to be answered in a way which gives eect to that policy. The rst supplier
and the banks interpretation of the section fails to do that. On their
interpretation, the buyers promise to pay would be actionable as soon as
payment fell due in accordance with the express terms of the contract and
the result is that the buyers promise to pay the price would become an
B
entirely independent promise, i e not conditional on the transfer of property
(unless expressed to be so). Their focus on legal history has led them to
ignore the fact that the court is being asked to conduct an exercise in
statutory interpretation, which requires it to look rst and foremost at the
language of the 1979 Act. On the rst suppliers and the banks approach,
section 49 would be otioseindeed, it would in a sense be misleading, or at
C the very least confusing, because it would declare some, but not all, of the
circumstances in which a seller could maintain an action for the price. There
is also a number of internal indicators which show that section 49 was
intended to comprise an exhaustive statement of the circumstances in which
a seller could sue for the price since there are at least three other provisions
which expressly produce dierent results: see sections 17(1), 20 and 55. The
rst suppliers and the banks argument depends on two erroneous
D
propositions: (i) the Sale of Goods Act 1893 was intended to reect some,
but not all, of the circumstances in which the common law recognised a
sellers right sue for the price of goods, and (ii) before 1893 the common law
recognised a sellers right to sue for the price of goods even though property
had not passed and the price was not expressed as being payable on a day
certain. The 1893 Act was, as its Preamble expressly states, An Act for
E codifying the Law relating to the Sale of Goods. The purpose of a code is to
provide a systematic and comprehensive statement of the law, not a
summary of part of it. Furthermore, the expression used in the Preamble
means that the draftsmans purpose was to codify all of the then law, not
part of it. Once an area of the law has been codied, it is not open to judicial
alteration. The purpose of any codication is to deliver certainty by
encapsulating the law in a single legislative instrument. It is antithetical to
F
that purpose to invite the court to conduct a detailed examination of the
common law as it may have existed before the code was enacted. In any
event, there is no case law before the 1893 Act which shows that a seller
could bring an action for the price other than in the circumstances described
in section 49. Properly analysed, neither Castle v Playford (1872) LR 7 Ex
98 nor Martineau v Kitching (1872) LR 7 QB 436 undermines the
G proposition that section 49 contains an exhaustive list of the circumstances
in which a seller can sue for the price. Section 49 of the 1979 Act, and the
same provision in the 1893 Act, have generally been interpreted as an
exhaustive statement of the circumstances in which a seller can sue for the
price, either implicitly (see Stein Forbes & Co v County Tailoring Co (1916)
115 LT 215; Muller, Maclean & Co v Leslie & Anderson (1921) 8 Ll L Rep
328 and Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002] EWCA
H
Civ 1064) or expressly: see Colley v Overseas Exporters [1921] 3 KB 302,
310 and Shell-Mex Ltd v Elton Cop Dyeing Co Ltd (1928) 34 Com Cas 39,
44. The view to the contrary expressed in Harry & Garry Ltd v Jariwalla
(unreported) 16 June 1988; [1988] CA Transcript No 516 was obiter. In
1060
(SC(E)) [2016] AC
Argument
Manufacturers Ltd (1951) 82 CLR 621 an earlier, contrary decision in A

Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304 was not cited.
Accordingly, Caterpillar and the case law supporting it are correct. In so
far as the rst supplier and the banks generalised appeal to freedom of
contract is intended to trumpor ignorethe arguments of principle and of
statutory interpretation on which the owners rely, it should be rejected. The
1979 Act means what it says: it limits the availability of the remedy of an B
action for the price, whatever the parties may have agreed. The owners
interpretation does not interfere with freedom of contract in any event. In
principle, it would be open to the parties to make an express agreement
stipulating that property is deemed to pass, irrespective of whether in reality
it has passed. If such a provision was made in a contract of sale of goods,
then an action could be brought by the seller for the price entirely
C
consistently with section 49.
Bright QC replied on the Caterpillar point.
The court took time for consideration.
11 May 2016. LORD MANCE JSC (with whom LORD NEUBERGER

OF ABBOTSBURY PSC, LORD CLARKE OF STONE-CUM-EBONY, D
LORD HUGHES and LORD TOULSON JJSC agreed) handed down the
following judgment.
Introduction
1 Despite the signicance of her name in Cartesian philosophy, the
vessel Res Cogitans depends on bunkers. The parties submissions have in E
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 F
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 G
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 rst 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 worlds largest
bunker supplier and is now insolvent. OWBAS in turn obtained them from H
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,
1061
(SC(E))
Lord Mance JSC
A ING Bank NV (ING) nanced the OW Bunker Group and claims as

assignees of any claim which OWBM has against the owners.
OWBMs contract with the owners

4 OWBMs supply contract with the owners described itself as being for
sale and delivery ex barge of 110 metric tons of gasoil at a price of US $848 per
B metric ton and 1000 metric tons of fueloil at a price of US $359 per metric ton
(a total of US $443,800), with Payment within 60 days from date of delivery
upon presentation of invoice. But it was expressly subject to the OW Bunker
Groups general terms (said in OWBMs printed sales order conrmation to
be well known to you and to be published on OWBMs website).
5 The general terms start with the following General Introduction:
C A.1 This is a statement of the terms and conditions according to
which the International OW Bunker Group (hereafter called OWB) will
sell marine bunkers.
A.2 These conditions apply to all oers, quotations, orders,
agreements, services and all subsequent contracts of whatever nature,
except where otherwise is expressly agreed in writing by OWB.
D 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
E 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
ange/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
F 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
G 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
H
any third party or other vessel.
The vessel is dened by clause B.1 of the terms as meaning:
the buyers vessel, ship, barge or o-shore unit that receives the
supply/bunkers; either as end-user or as transfer unit to a third party.
1062
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Lord Mance JSC
7 It is unnecessary to consider whether the recognition in clause B.1 that A

the vessel might serve as a transfer unit to a third party ts 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 B
propulsion of the vessel Res Cogitans herself.
RMUKs contract with OWBAS

8 OWBASs purchase from RMUK priced the gasoil and fueloil at
respectively US $333 per metric ton and US $830 per metric ton (a total of
US $416,000), and required payment within 30 days from date of delivery C
against hard copy of invoice. The purchase was subject to RMUKs 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 sellers marine fuels
are commingled with other marine fuels on board the vessel, title to the D
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 prot, that the OW Bunker
Groups terms would be likely to include provisions to like eect to clauses E
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 F
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 vessels propulsionand did so both within and,
quite probably after, the 30 and 60-day periods allowed for payment under G
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 H
and requesting immediate payment from the owners of US $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.
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A 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
B 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
C
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
D go to the Court of Appeal on their cross-appeal. The Court of Appeal
(Moore-Bick, 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

E 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 OWBMs cross-claim for the price, the arbitrators noted that
F 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:
G (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
H 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,
1064
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Lord Mance JSC
section 49(1) precluded recovery of the price of goods in circumstances A

where the property in goods had not passed to the buyer.
13 The authority to which they were referring is FG Wilson
(often referred to as Caterpillar). 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 B
the light of the issues as addressed to and answered by the arbitrators as well
as in the light of Males Js 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 C
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 1979: (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 D
raised by OWBMs 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 eect 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 E
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 the 1979 Act;
or (b) otherwise under the contract; or (c) in bailment; or (d) in
restitution; or (e) in tort?
F
They held that they could answer issue 4(a) to the eect 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 G
falling outside constraints of the 1979 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, at para 46:
If, as we believe we must, we accept that section 49 of the 1979 Act
H
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 oers 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 OWBMs invoice? The owners have suggested that
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Lord Mance JSC
A 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 itand no doubt others like itas 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
the 1979 Act appears to us to be unacceptable and quite unreal.
B
17 In the next paragraph (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 OWBMs invoice within the 60
days credit period. We are quite condent, that, when they did so, it
C would not have crossed anyones mind to inquire 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.
D
There is in our view no challenge to the provisions of the 1979 Act or their
eect 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.
E
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 nd 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
F doing so they addressed issue 5, rejecting OWBMs case that their supply to
the owners contained various implied terms, now no longer relied on.
Turning to issue 9, this asks: Did 1979 Act apply to the contract between
the owners/OWBM in any event and if not what is the eect 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
G
deal shortly with issues 10 to 13, saying, at 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 modication of the
requirements of the 1979 Act because the 1979 Act did not apply and its
terms were not engaged. As to issue 11, there was no such requirement.
H
As to issue 12, no terms were implied into the contract by virtue of
section 12 of the 1979 Act. And, nally, 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.
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Lord Mance JSC
20 Issues 10 to 13 and the answers given read as follows: A
10. Do the OWBM terms and conditions, on a true and proper

construction, modify the requirements of section 12 of the 1979 Act such
that OWBM was required to own or have property in the bunkers at the
point of delivery?
Answer: The OWBM terms and conditions did not modify section 12
of the 1979 Act, but, under the contract between the owners and OWBM, B
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.
C
12. What terms were implied into the contract by virtue of section 12
of the 1979 Act?
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 of the 1979 Act, there were none to be breached. No other D
breaches were specied, 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 OWBMs contract
to supply bunkers to the owners was not a contract to which the Sale of E
Goods Act 1979 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: [2015] 2 Lloyds Rep 563, paras 48, 52. He held that it was not
subject to any further condition as regards the passing of property in any
bunkers used. OWBM/INGs cross-appeal, to recover the price under
F
section 49 of an equivalent sum by way of damages, did not on this basis
arise, but Males J none the less expressed some views on it, obiter. He
thought, at 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 G
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 satised the language of section 49(2). Having
expressed these views, he refused permission, as already stated, in respect of
H
the owners cross-appeal.
22 The issues argued before the Court of Appeal were thus eectively
limited to two: (1) Was the contract a contract of sale within the meaning of
section 2(1) of the Sale of Goods Act 1979? (2) If not, was it subject to any
implied term that OWBM would perform or had performed its obligations
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A to its supplier, in particular by paying for the bunkers timeously? Like the
judge, the Court of Appeal was bound by the Caterpillar decision [2014]
1 WLR 2365, so that it could have done no more than hold that section 49 of
the Sale of Goods Act 1979 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.
B
23 The Court of Appeal agreed substantially with the judge in
answering the two main questions before it in OWBM/INGs favour, ante,
p 1039. 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 LJ, giving
the main judgment, with which the other members of the court agreed, said,
C ante, pp 10481049, paras 3334:
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
D 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 denition 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
E to the extent that they are inconsistent with the parties agreement. The
diculties 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
F 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
G 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
H
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
1068
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Lord Mance JSC
bunkers, all of which had been consumed when the period of credit A
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 B
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 [2014] 1 WLR 2365,
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 1979, section 49 should not be read
C
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 ve basic, though
overlapping, 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 D
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 fthly 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
E
sale within the statutory denition might seem unpalatable.
Analysis of the nature of the contract

26 Mr Crows rst proposition is well established and needs no great
elaboration: see e g Stoneleigh Finance Ltd v Phillips [1965] 2 QB 537. An
agreement may also be in substance a contract of sale, even though it has
ancillary aspects, e g for after-sales services, which do not involve the passing F
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 dened term which includes any party G
requesting oers 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
H
shall not be entitled to use the bunkers, the terms introduce the
qualication other than for the propulsion of the vessel.
27 The qualication clearly reects 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
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A unsurprising that they do so combined with an express qualication

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
B
expected that bunkers supplied might or might not be used in propulsion
before payment for them was made. But OWBMs (and RMUKs)
contractual terms and the assumed facts (particularly paras 13, 20 and
30)together with an admissible modicum of commercial awareness on the
courts 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 takenall point in one direction. They
C 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, OWBMs 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: rst, to permit consumption prior to any payment and (once the
D 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
E
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 contract of sale when . . . the conditions are fullled 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
F property, conditional on the bunkers remaining unburned when payment is
made. The diculties 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. Section 2(3)(6) can readily be applied where there is a condition
G 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 paymentthe 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
H 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 OWBMs invoice after 60 days:
1070
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Lord Mance JSC
it would not have crossed anyones mind to inquire what bunkers had A
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).
30 Mr Crow sought to avoid some of these diculties 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 B
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 vessels propulsion as and when they did so prior to payment, C
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 Appeals 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
D
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 E
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 Harry & Garry Ltd v
Jariwalla (unreported) 16 June 1988; [1988] CA Transcript No 516. The
English buyers, Harry & Garry, had under contracts of sale received a F
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 moneys 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 G
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. H
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 & Garrys appeal was allowed. Kerr LJ, giving the main
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A judgment, noted that section 49(1) was in terms inapplicable, because of the
reservation of title. But he went on to say of the judges 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 plaintis, if indeed they
were sellers of these goods, would apparently have been a claim for
B damages for non-acceptance under section 50, there being no other
provision of the Act which would have given the plaintis any remedy.
With all due respect to the judge, no doubt inuenced 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
C
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 eect, 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.
D When it then came to the specic agreement about the 2,494 selected
sarees, I think the nature of the agreement was that in consideration of the
plaintis allowing them to take that consignment away and seeking to
dispose of it as agents for the plaintis, who remained the owners of it,
they agreed again either to perform the rst 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 46,763.45. That was the nature of
E
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 the Harry & Garry case, so here, in
my opinion, the relevant agreement is, in Kerr LJs words, Like many other
contracts in complex situations . . . a sui generis transaction, not a contract
F
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 oered a
feature quite dierent from a contract of sale of goodsthe 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
G 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 rst 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 1979,
for the purposes of analysing whether, on the termination of the charter, the
H
vessels owners had acquired title under section 25(1) of that Act: Forsythe
International (UK) Ltd v Silver Shipping Co Ltd (The Seatta) [1994] 1 WLR
1334 and Angara Maritime Ltd v Oceanconnect UK Ltd (No 2) [2011]
1 Lloyds Rep 61. In neither case was the nature of the contract or the
present issue questioned or directly addressed. Similarly, it was simply
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Lord Mance JSC
assumed that the transaction was one of sale within the Act in the appellate A
authorities of Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch
25 and Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339the 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
B
generis, like the present, it is dicult to think that could have had any eect
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 Appeals 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 C
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
vessels propulsion, and would cease entirely to be a contract of sale if and
D
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 1979, 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 E

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 briey as an implied duty on F
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
dierently and more widely in the Court of Appeal, which was however left
in the end in understandable uncertainty about the precise content of the G
alleged implied duty. For similar reasons to those given by Moore-Bick LJ in
para 36, ante p 1049, I share the Court of Appeals 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, OWBMs only implied undertaking as
regards the bunkers which it permitted to be used and which were used by
H
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
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A 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
B
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 dierent. 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
C 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 RMUKs 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,
D
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 classied as a contract of sale within section 2 of the Sale of Goods Act
1979 cannot and does not arise. The owners case was that, if the contract
E 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 the Caterpillar case [2014] 1 WLR 2365
which currently supports it. Since the point was fully argued and has general
signicance, I propose to say something on it.
41 First, however, I should briey address the preliminary question,
F
very specic to this particular case, whether it would, if necessary, even have
been open to OWBM to challenge the correctness of the Court of Appeals
decision in the Caterpillar case. 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 1618 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 1979 did not apply to the contract.
G Further, their reasons appear to postulate that the Sale of Goods Act 1979
could apply but that a contractual claim for payment (albeit not for a
price) could still be maintainedotherwise why the references to
section 49 ruling out a claim for the price, to section 50 oering no
alternative, and to their conclusion presenting no challenge to the Sale of
Goods Act 1979?
42 On that basis, was the Court of Appeal correct in the Caterpillar
H
case 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 the Caterpillar case 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
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Lord Mance JSC
them to its subsidiary, John Holt plc (Holt Nigeria), a Nigerian company. A
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 duciary 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
B
on the passing of property, gave the principal reasoned judgment on the
question which arose from the majoritys 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 C
Commercials Ltd [2002] EWCA Civ 1064, the other Harry & Garry 16 June
1988, discussed above on another aspect and which Longmore LJs
judgment records was unearthed by the industry of counsel appearing in the
Caterpillar case.
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
D
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; the Otis Vehicle Rentals
case [2002] EWCA Civ 1064) 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 Ll L Rep 328 and E
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 reected 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
F
payment, provided that he is ready and able at the same time to deliver to the
buyer the goods and property in them: the Otis Vehicle Rentals case [2002]
EWCA Civ 1064 at [16] per Potter LJ. In the Caterpillar case [2014]
1 WLR 2365, 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 RMUKs contract with OWBAS or OWBMs contract with G
the owners, whereby the price was payable within respectively 30 or 60 days
of delivery. This was also Males Js view, diering 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
H
Development v Servicemens 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 2 Car & K 153 and to Benjamin on Sale, 7th ed (1931), p 861,
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A 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 [1921] 3 KB 302 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
B
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,
C and at one point Parke B pointed out that, since the land was still the
plaintis at law, the plainti might bring ejectment. The plainti 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 at p 483 that
Unless the defendants are bound to pay the purchase-money, no
D
damages can be recovered for the non-payment of it: the plainti,
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 at p 485 that the plainti was:
substantially in the same situation, for the purpose of recovering the
E 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 5556 in the Caterpillar case [2014] 1 WLR
F 2365 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 7 M & W 474 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
G Metals Ltd (formerly Metallgesellschaft 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 propertythe 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
H
be no dierence 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 None the less, there is articiality about treating the sellers 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
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Lord Mance JSC
here. Part of the thinking behind the rule in section 49(1) is no doubt, as A
Longmore LJ observed [2014] 1 WLR 2365, 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 sellers creditors on
bankruptcy could both seize goods still on his premises and sue the buyer B
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 (1826) 5 B & C 857, the real signicance 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 C
mentioned by Longmore LJ would not have existed, if the goods had been at
the buyers 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 indenite expansion. Further, the main focus of D
section 49(2) may well have been on cases where delivery has not been
madehence 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
buyers risk and are destroyed or damaged. The question is whether in all E
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 the
Harry & Garry case 16 June 1988, 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 1979, said this: F
In any event, howeverand this is the second reason why I dier
from the judgeit 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 eect the price of the goods, even
though he cannot bring himself within the terms of section 49. G
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.
H
Secondly, Mr Bartlett referred to a part of the speech of Lord Diplock in
Christopher Hill Ltd v Ashington Piggeries 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
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A 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
B
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 Com Cas 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.
C
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
Servicemens Co-operative Joinery Manufacturers Ltd 82 CLR 621, before
concluding:
If, contrary to the primary view which I have expressed, this
D transaction recorded in the form of the document of 31 December 1982
was indeed a sale by the plaintis 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 plaintis to sue for the 46,000-odd once a
reasonable time had elapsed and it had become clearall of which has
now happenedthat they were not going to be relieved from the bills of
exchange. Accordingly, I would allow this appeal to the extent of
E judgment for the plaintis for 46,763.45, with the appropriate interest.
52 Like Longmore LJ in the Caterpillar case [2014] 1 WLR 2365,
para 53, I am unconvinced that the solution to the present problems is found
in section 55 or in Lord Diplocks dicta in Christopher Hill Ltd v Ashington
Piggeries Ltd [1972] AC 441. Both concern the negativing or variation of
any right, duty or liability [which] would arise under a contract of sale of
F goods by implication of law, into which category it is dicult to t the
statutory provisions of section 49. I am also unconvinced that Wright Js
judgment in Shell-Mex Ltd v Elton Cop Dyeing Co Ltd (1928) 34 Com Cas
39 is of present assistance, and I have already questioned whether both
members of the majority in the High Court of Australia in the Minister for
Supply case 82 CLR 621 were necessarily speaking of situations outside
G section 49(2).
53 Nevertheless, the 1893 Act was rooted in and intended to reect
common law authority, developed in an era when freedom of contract and
trade were axiomatically accepted as benecial. 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
H
least some room for claims for the price in other circumstances than those
covered by section 49.
54 The Harry & Garry case 16 June 1988 is on its facts such a case.
Title being reserved to Harry & Garry, the Jariwallas were none the less
permitted to take possession under the buy back contract, and to dispose of
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Lord Mance JSC
some of the sarees of which possession was taken back. It seems entirely A
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
buyers risk, but property has not passed. This situation was addressed in B
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. C
Whether or not it had, the true construction of the contract was from the
buyers viewpoint, in Cockburn CJs words LR 7 Ex 98, 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
D
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 E
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 F
all probability, would have been payable for the ice.
The two judgments dene the sum payable in very slightly dierent 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 Queens Bench Division. LR 7 QB 436
Sugar was agreed to be sold, with the price payable Prompt at one month; G
goods at sellers risk for two months, to be kept at the sellers 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 re destroyed the
rest. The buyer having disputed his liability to pay for the undelivered sugar
which had been burned in the re, 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 445. The court held that they H
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:
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A assume 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
B 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
C
the sellers warehouse, they shall, nevertheless, remain there at the buyers
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,
D 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 sellers property but are at the buyers risk and are
destroyed by perils of the seas or by re. The present situation is in my
opinion a fortiori. The price of bunkers, which remain the sellers property
E but which are both (i) at the buyers 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 benet, 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 16 June 1988 itself was that the price was
F 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 sellers permission.
The precise limits of such circumstancesand the signicance 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 riskmust be left for
determination on some future occasion. I would only add that, when that
G
occasion arises, much benet 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 diculties
[2014] LMCLQ 564. She also addresses some critical remarks to the other
issue in the Caterpillar case [2014] 1 WLR 2365, that is the interpretation
of Holt Liverpools 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
H 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, overruling 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
1080
(SC(E)) [2016] AC
Lord Mance JSC
was recoverable by virtue of its express terms in the event which has A
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 B
by OWBM (or OWBAS) of any supply contract higher up the chain, as the
owners have allegedthough 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 OWBMs claim to the C
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 1979 was also no bar to a claim by OWBM to payment of the
agreed price.
D
Appeal dismissed.
JILL SUTHERLAND, Barrister

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1034

PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (SC(E))

PST Energy 7 Shipping LLC and another v OW Bunker

A would become impossible to transfer property in them. The Court of Appeal

Laird v Pim (1841) 7 M & W 474 A

the arbitrators, and in particular whether terms would be implied in like A

Stephen Cogley QC, Jeremy Richmond and Liisa Lahti (instructed by

The court took time for consideration.

22 October 2015. The following judgments were handed down.

A 8 OWBM and ING also appealed by agreement in relation to a number

A The nature of the contract

A consumed within 60 days of delivery and as a result would cease to exist. As

Owners liability to pay for the bunkers

analogous to that contained in section 12 of the 1979 Act or otherwise (issue A

A A contract of sale of goods is a contract by which the seller transfers

Appeal dismissed with costs.

SUSAN DENNY, Barrister

implication but the implication is unjustied as it is neither obvious nor A

Manufacturers Ltd (1951) 82 CLR 621 an earlier, contrary decision in A

The court took time for consideration.

11 May 2016. LORD MANCE JSC (with whom LORD NEUBERGER

A ING Bank NV (ING) nanced the OW Bunker Group and claims as

OWBMs contract with the owners

7 It is unnecessary to consider whether the recognition in clause B.1 that A

RMUKs contract with OWBAS

The assumed facts

A The proceedings to date

The issues and the award in more detail

section 49(1) precluded recovery of the price of goods in circumstances A

20 Issues 10 to 13 and the answers given read as follows: A

10. Do the OWBM terms and conditions, on a true and proper

The proceedings in court in more detail

The issues before the Supreme Court

Analysis of the nature of the contract

A unsurprising that they do so combined with an express qualication

The owners alternative ground of appeal E

The position if the contract had been one of sale

A by the terms of their agreement, to create situations which, while being

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