When is a sale not a sale? When you reserve title to consumable goods — apparently

In PST Energy 7 Shipping LLC Product Shipping & Trading S.A. v O.W. Bunker Malta Ltd & Ors [2015] EWCA Civ 1058 (available on BAILII) bunker suppliers OWBM delivered bunkers to a vessel at a Russian port, on 60 days’ credit. Under the contract they reserved title until payment but, realising that bunkers exist to be burnt, consented to the ordinary use of the bunkers to propel the ship.

Big deal, you might say: what’s the hassle? Well, the suppliers had bought from other suppliers RMUK also on reservation of title terms — not including any provision for use — and hadn’t paid. The shipowners were at a loss who to pay — OWBM or RMUK. To forestall a demand from RMUK the shipowners argued that they could not have to pay OWBM, since OWBM had not provided title to the bunkers and hence were in breach of s.12 of the SGA. Males J said ([2015] EWHC 2022 (Comm)) that the owners were bound to pay OWBM. This was not, he said, a sale of goods at all (!!), since both parties contemplated that by the time property passed there wouldn’t be any goods for the shipowners to become owners of. The shipowners had agreed to pay, not for oil, but for a licence to burn oil: they had received this, and therefore had no defence to a claim for payment.

A screwy result? Certainly looked like it, and expedited leave to appeal was given. Not that it did any good: the CA has now dismissed the appeal and confirmed the shipowners’ liability to pay. What, you might ask, if the shipowners now find themselves liable to RMUK? We’ll leave that to another day, says the court.

At the risk of sounding cynical, this looks like at least another couple of terms’ school fees assured to the lawyers engaged in sorting out this debacle. And you thought the definition of what counts as a sale of goods was a boring subject …

Andrew Tettenborn