Shot by both sides? Interpleader proceedings in the OWB saga.

 

The bankruptcy of OW Bunkers in November 2014 has led to many shipowners facing competing claims for the supply of bunkers from ING as assignee of OWB and from physical bunker suppliers. In Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, http://law.justia.com/cases/federal/appellate-courts/ca2/15-97/15-97-2016-02-24.html, an interpleader was filed on behalf of shipowners and an injunction obtained preventing the imminent arrests of three of vessels by U.S. Oil Trading LLC, the physical supplier of bunkers. The Second Circuit has now rejected U.S. Oil Trading’s appeal. This contrasts with the position in Singapore last year where the Court of Appeal denied interpleader proceedings in similar circumstances. It reasoned that the suppliers’ in rem claims did not compete with ING’s contractual, in personam, claims. In the UK the shipping world awaits with bated breath the decision of the Supreme Court on whether the Sale of Goods Act applies to contracts for the supply of bunkers.

Insolvency and anticipatory breach. More from Singapore

In The STX Mumbai [2015] SGCA 3; [2016] 1 Lloyd’s Rep 157, the Singapore Court of Appeal has held that the doctrine of anticipatory breach does apply to executed contracts and in appropriate circumstances a party’s insolvency is capable of amounting to an anticipatory breach. Bunkers had been supplied to a vessel with payment to be made within 30 days. A company in the corporate group of which the shipowning company was a part had become insolvent and the bunker supplier took the view that payment was unlikely to be made. Accordingly, three days before the due date for payment, they demanded immediate payment by the close of business, and when that was not forthcoming, arrested the vessel the following day. At first instance the in rem proceedings were struck out as legally unsustainable as the insolvency of an associated company in the shipowner’s corporate group did not amount to an anticipatory breach by the shipowner. Futhermore, the Judge expressed the view that the doctrine of anticipatory breach applied only to executory contracts and not to an executed contract such as the present.

The Court of Appeal disagreed. The doctrine could apply to executed contracts. Although insolvency in itself would not constitute an anticipatory breach, it might well do so in the proper context. Much would depend on the precise facts, which could only be adduced if the action went to trial. The evidence showed some plausible connection between the insolvent company and the shipowner such that it was not completely unarguable that the former’s insolvency could well have made it impossible for the latter to make timely payment under the bunker supply contract in respect of the vessel. Accordingly, the bunker supplier’s case was not legally unsustainable and its claim would not be struck out.