O.W. Bunker A/S *Update*

Update 11 May 2016

We refer to our previous Industry News updates relating to the OW Bunker bankruptcy.  Following our last update, the appeal of the ”RES COGITANS” decision was heard by the Supreme Court on 22 and 23 March.  The Supreme Court has today, 11 May, issued its judgment.  Unfortunately, the Supreme Court has dismissed Owners’ appeal.  The Supreme Court held that:

1. The bunker supply contract was not a sale contract, so it was not subject to the Sale of Goods Act 1979; and

2. Owners had no defence to OW/ING’s claim for payment of the bunkers regardless of the fact OW had not paid the physical supplier.

The only condition placed on OW/ING, according to the Supreme Court, was that OW would supply the bunkers to Owners/Charterers on terms which permitted the use of the bunkers before payment was due.

The Supreme Court also went further in noting that even if the contract had been subject to the Sale of Goods Act, OW/ING would still be able to pursue a claim for payment of the bunkers.  This, in effect, reversed part of the Court of Appeal’s decision which provided  Owners with a possible defence where all or a substantial part of the bunkers remained unconsumed on the date payment was due.  The Supreme Court has ruled that payment would still be due regardless of whether bunkers were, in whole or in part, still on board the vessel.

Unfortunately, the Supreme Court’s decision brings to an end Owners’ ability to appeal the decision on this issue any further.  As a direct consequence, an Owner or Charterer who contracted with OW potentially remains exposed to paying not only OW/ING but also the physical supplier in those instances where the supplier has been granted a lien under local law.

Update 19 February 2016

We refer to our previous Industry News updates relating to the OW Bunker bankruptcy, in particular our update of 12 February, advising that the Supreme Court had granted leave to the Owners of the “RES COGITANS” to appeal the Court of Appeal judgement.  The Supreme Court has now expedited the appeal process and the matter is set for a hearing on 22 March 2016.  We will continue to provide updates in due course. 

Update 12 February 2016

We refer to our previous Industry News updates relating to OW Bunker and in particular, our update dated 23 October, reporting on the Court of Appeal judgment in “RES COGITANS”.  As anticipated, the Owners of “RES COGITANS” did seek leave to appeal to the Supreme Court and on 11 February 2016, leave to appeal was granted.  The date of the Supreme Court hearing is not yet known, but we will advise when there are further developments.

Update 23 October 2015

We refer to our previous Industry Newsletters regarding OW Bunkers’ (“OWB”) bankruptcy dated 27 November 2014 and 16 July 2015.

By way of update, on 22 October 2015 the Court of Appeal delivered its judgment on the “RES COGITANS”.  The Court of Appeal upheld the Commercial Court’s decision of 14 July 2015 that a contract for the sale and purchase of bunkers on OWB’s terms is not a contract of sale within the scope of the Sale of Goods Act 1979, and the defence put forward by the Owners (to the effect that OWB/ING are not entitled to payment due to OW Bunkers’ failure to pass title to the bunkers) failed.

The decision of the Court of Appeal however does appear to give rise to potential defences to shipowners, where the whole or a substantial part of the bunkers remained unconsumed either on payment or after the expiry of the credit period under OWB’s invoices.  Whether these defences or any others arise in any given situation and whether they will succeed will obviously depend on the factual circumstances of each case, and Members should not hesitate to contact the FD&D team with any queries.

It is expected that the Owners may seek leave to appeal to the Supreme Court and we will continue to provide further updates in due course.

Update 16 July 2015

We refer the Membership to our previous Industry Newsletters regarding OW Bunkers’ bankruptcy dated 27 November 2015.

By way of update, Owners of a vessel, in a test case in London Arbitration sought to challenge the right of OW Bunkers/ING (“OWB/ING”) to obtain payment for bunkers supplied to their vessel, “RES COGITANS”, on the basis that the bunker supply contract was governed by the English Sale of Goods Act 1979 (“SOGA”) and that title to the bunkers had not passed.  The Tribunal held, however, that the bunker supply contract was not governed by the SOGA and that OWB/ING could enforce their right to payment as a simple debt.

Owners appealed the Arbitration Award to the High Court.  The appeal was heard earlier this month and on 14 July 2015, the High Court judgment was handed down.  The High Court Judge dismissed Owners’ appeal and upheld the Tribunal’s award that the Owners were liable to OWB/ING for the unpaid debt.

Leave to appeal the High Court decision to the Court of Appeal was granted on 15 July 2015 and it is anticipated that the appeal will be heard on an expedited basis.  It is also understood that at least one physical supplier is seeking leave to intervene in the appeal process.

The outcome of that appeal will obviously have a significant impact on the large number of pending claims between Owners/operators and OWB/ING.

As Members will already be aware, the FD&D Department has been handling a significant number of cases relating to or arising from the OWB bankruptcy in November 2014.  Consequently, Members should not hesitate to contact the FD&D team with any queries.

Update 27 November 2014

We refer the Membership to our previous Industry Newsletter regarding OW Bunker’s Bankruptcy, dated 14 November 2014.

On 7 November OW Bunker A/S was made the subject of a bankruptcy order by the Probate Court in Aalborg. Since that time the FD&D Department of the Association has handled a substantial number of new claims and queries from Members regarding demands they have received from the trustees of OW Bunker in Denmark, from ING Bank (as assignee of OW Bunker  Group’s accounts receivable), and from individual suppliers of bunkers, all demanding payment for the same bunker stems.  In addition, ING has appointed PricewaterhouseCooper (“PWC”) as receivers in respect of the receivables pledged by OW Bunker Group to ING and the Association is aware that PWC has also served notices of demand for payment.  A further complication is the fact that several of the OW Bunker Group subsidiaries have filed for bankruptcy or commenced liquidation proceedings in numerous countries.

With all the various demands being made upon Members for payment for the same bunkers, Owner/Charterer Members face the risk of having to pay twice for the same bunkers – something which obviously they wish to avoid if practically possible.

(1)    Claims by physical suppliers

Though the OW Bunker Group 2013 “Terms and Conditions of sale for Marine Bunkers” provide for English law and London arbitration, many of the physical suppliers are claiming the right to payment for the bunkers stemmed on the basis of local law, which, in some cases, grants a maritime lien-type status against the Vessel which they can enforce by arresting or detaining the Vessel (even though there is no contractual connection between the Members who ordered the bunkers and the physical supplier).

The FD&D Department has handled, and continues to handle, claims where Members’ vessels have been threatened with arrest or have actually been arrested.   Various issues can come into play in assessing the supplier’s claim such as the physical supplier’s terms, the law where the bunkers were stemmed, and the law that applies where the physical supplier threatens to take, or has taken, action against a Members’ vessel.  As a consequence, the FD&D Department can assist Members in assessing whether there is a defence and how best to resolve those claims.

(2)    Claims by ING / OW

The FD&D Department has also considered the grounds for challenging a claim for payment from OW Bunker Group’s trustees and/or ING Bank when and if they are brought against the Member.  The Department can, therefore, assist in evaluating the strength of Members’ position and advising what steps, if any, that Members can or should be taking at this stage.

(3)    Overall strategy

The FD&D Department has also considered potential strategies for reaching an overall settlement with both the physical supplier and ING / OW and the merits of taking pro-active action by, for example, the use of interpleader to deposit the amount due in a Court which has jurisdiction over the dispute so that the Court can determine which claimant is entitled to payment for the bunkers and thus release the Member from further liability for the debt.   However, any protection awarded by such action may only be partial and not necessarily protect against arrest in another jurisdiction.  In addition, such procedure is often too slow to provide a prompt solution.  The FD&D Department is, therefore, considering each factual situation on its own merits and considering what action, if any, it is prudent to take in those particular circumstances.

In light of the complexity of the current situation and in order to minimise the risk of incurring unnecessary costs and expenses, Members who are confronted with multiple and competing claims for payment for the same bunker stem are strongly advised to contact the FD&D Department for assistance and guidance in preparing messages in response to demands for payment and in dealing with the various claims.

14 November 2014

As many Members may know, on 7 November 2014, O.W. Bunker A/S filed for bankruptcy.  Shortly afterwards, O.W. Bunker & Trading A/S and O.W. Supply & Trading A/S likewise filed bankruptcy.  On 10 November, O.W. Cargo Denmark A/S also filed for bankruptcy.  The four companies are now being administered by two trustees:  Pernille Bigaard of the Danish firm Plesner and John Sommer Schmidt of the Danish firm Gorrissen Federspiel. 

The Club instructed Danish lawyers, Bech-Bruun, to provide some general advice on Danish bankruptcy procedure.  In particular, with regards to filing claims that Members may have against any of the above O.W. entities, Bech-Bruun advise that a notice of claim can be filed by sending an email or letter to the trustees which sets out the nature of the claim clearly and is supported by all documentation which sufficiently establishes the claim.  There are no strict formal requirements that the notice must meet, simply that it sets out Members’ claim and that it is supported by documentation.

Further, there is no time limit to file the notice of claim, except that all claims would need to be filed prior to the estate being wound up or closed down by the Trustees.  The Trustees are required to provide notice in advance of their intention to close the estate.  Presently, it is expected the bankruptcy will last some years before it can be closed.  If a claim is filed within four weeks from the decree date (the earliest start date being 6 November) any creditor who has filed within that time will have the right to vote if any other creditor calls a creditors’ meeting and demands a change of Trustee. 

Once a claim is filed, this will entitle the creditor to receive semi-annual updates from the Trustees regarding the progress of the bankruptcy proceedings. 

Those Members who wish to file claims against the above O.W. entities should send their claims to the following:

Christian Pedersen         ph. +45 86 20 74 71      cpe@gorrisenfederspiel.com

and send in copy to:

Morten Pedersen           ph. +45 33 41 41 44      mmp@gorrissenfederspiel.com

Line Gritt Boel Jensen   ph. +45 33 41 42 68      lgj@gorrissenfederspiel.com

The Club is currently dealing with a large number of enquiries from Members who contracted with one of the various O.W. entities for bunkers and have received demands for payment from the supplier of the bunkers who has not been paid by the O.W. entity for those bunkers.  Since the current situation is complex and changing, we strongly recommend Members to contact the FD&D department to assist in advising how best to deal with such demands for payments from the suppliers in order to protect Members’ interests, as simply paying the demand from the physical supplier may not necessarily protect the Members from further demands for payment from other Claimants.