King Crude Carriers SA & Orsv Ridgebury November LLC and others

Factual and Procedural Background

This appeal arises out of three materially identical Memoranda of Agreement (the “MOAs”) concluded between the Sellers and the Buyers between 28 and 30 April 2020 for the sale and purchase of three vessels, on the Norwegian Saleform 2012 with amendments. Under clause 2, the Buyers were obliged to lodge a 10% deposit in a designated account with a specified deposit holder within three banking days of (i) the MOA being signed and exchanged and (ii) written confirmation by the deposit holder that the account was fully opened and ready to receive funds. Both parties were obliged to provide all necessary documentation to open and maintain the account.

The Buyers failed to provide the required documentation to the deposit holder. Consequently, the deposit holder never confirmed that the accounts were opened and ready to receive funds, and the deposits were not lodged. The Sellers terminated the MOAs under the buyers’ default clause and brought claims for the deposits as debts.

In arbitrations under each MOA, a majority in each tribunal upheld the Sellers’ claims in debt, ordering payment of the respective deposits. The Commercial Court (Judge [Dias]) granted leave to appeal on a point of law and subsequently allowed the Buyers’ appeal, holding that the Sellers’ remedy lay in damages rather than debt. The Court of Appeal (Judge [Popplewell], with concurrences by Judges [Nugee] and [Falk]) reversed that decision and restored the arbitrators’ awards on the basis of a reformulated principle associated with Mackay v Dick. The Supreme Court (including Judge [Hamblen] and Judge [Burrows]) granted the Buyers permission to appeal.

It was an agreed assumption for the preliminary issues that, at the time of termination, market values exceeded the contract prices; on that footing, any damages for the Buyers’ breach might be nominal, which amplified the practical significance of whether the Sellers could recover in debt.

Legal Issues Presented

1. Issue 1: Where a party (i) has an obligation to make a payment when a pre-condition is fulfilled, (ii) has an obligation to fulfil the pre-condition, but (iii) in breach of contract fails to do so, is the pre-condition deemed to be fulfilled or otherwise treated as inapplicable or dispensed with so that the other party can claim the payment as a debt? Or must the other party’s claim be for damages only?
2. Issue 2 (Buyers’ secondary case, only if Issue 1 fails): Whether the Court of Appeal’s decision in “The Griffon” was wrong to hold that, under Saleform, the deposit was forfeited when the seller terminated the MOA for non-payment of the deposit.
3. Issue 2A: Whether the Supreme Court lacks jurisdiction because Issue 2 is outside the scope of the question of law on which permission to appeal was granted from the High Court.
4. Issue 3 (Sellers’ secondary case, only if Issue 1 succeeds): Whether, under Saleform, the right to the deposit accrues when the MOA is concluded so that clause 2 operates only as a condition to payability, not to accrual.
5. Issue 3A: Whether Issue 3 is not open to the Sellers because it was decided against them in the Commercial Court and they neither appealed nor raised it in the Court of Appeal.

Arguments of the Parties

Buyers’ Arguments

• There is no freestanding “Mackay v Dick principle of law” in English law that deems conditions precedent fulfilled when their non-fulfilment was caused by the debtor’s breach; English law addresses such situations via contractual construction and implied terms, or in damages.
• Authorities asserting deemed fulfilment are either distinguishable, explicable as damages cases, or rely on legal fictions (deemed performance, deemed waiver, quasi-estoppel) that English law should not endorse; reliance placed on statements by Judge [Scott] and Judge [Millett] rejecting fictional fulfilment as part of English law.
• On proper interpretation, clause 2 states true pre-conditions to the deposit obligation; there is no basis to construe those conditions away via a maxim against benefiting from one’s own wrong because the Buyers’ reliance is defensive and not to obtain a benefit or terminate the contract.
• No implied term can validly convert the escrow arrangement into payment directly to the Sellers or otherwise render workably payable a deposit into a non-existent account; such implication would contradict the express bargain and restructure risk fundamentally.
• Sellers’ secondary case on accrual fails: under Saleform, consistent with “The Blankenstein,” the right to the deposit accrues only when the stated pre-conditions are satisfied; the MOAs do not draw a distinction between accrual and payability.

Sellers’ Arguments

• English law recognises a principle, reflected in Mackay v Dick and other authorities, that an obligor cannot rely on non-fulfilment of a condition precedent caused by its own breach; the condition should be treated as satisfied or dispensed with so that the obligee may sue in debt.
• Alternatively, even if there is no general principle, the contracts should be interpreted, in light of the maxim that a party may not take advantage of its own wrong, as not requiring the pre-conditions where the debtor prevented their fulfilment; or an implied term should be recognised (for business efficacy or obviousness) to similar effect.
• Secondary case (only if Issue 1 fails): the right to the deposit accrued at contract formation; clause 2 concerns the machinery or timing of payment rather than accrual, so the Sellers may claim the deposit as a debt notwithstanding non-satisfaction of the pre-conditions.
• As to Issue 3A, the Sellers are entitled to advance Issue 3 as an alternative basis for upholding the Court of Appeal’s order without a cross-appeal, per the relevant procedural rules.

Table of Precedents Cited

Court’s Reasoning and Analysis

Issue 1. The Supreme Court held that there is no freestanding “Mackay v Dick principle of law” in English law deeming conditions precedent fulfilled when their non-fulfilment was caused by the debtor’s breach. The court’s analysis proceeded in several steps:

• Source and authority: Lord Watson’s speech in the Scottish case relied on a civil law doctrine and not on English authorities. English case law is inconsistent: while some decisions and dicta suggest “deemed fulfilment,” others (notably judgments by Judge [Scott] and Judge [Millett]) reject fictional fulfilment as part of English law.
• Conflict with established areas: Adopting a broad deemed-fulfilment rule would undermine settled rules in real property and sale of goods (illustrated by Colley), and beyond (e.g., freight), without principled limits. Attempts to confine the doctrine via exceptions (as in the Court of Appeal) were uncertain and unworkable.
• Rejection of legal fictions: The “deemed performance,” “deemed waiver,” or “quasi-estoppel” explanations are fictions. Modern English law prefers transparent reasoning grounded in contractual terms, interpretation, and orthodox remedies, not fiction.
• Primacy of contract terms: English law prioritises enforcing the bargain as written (express and implied terms). Where a pre-condition to a debt is not met because of breach, the appropriate remedy is damages measured by the expectation interest, subject to traditional limits.
• No injustice: Limiting the creditor to damages does not produce injustice. A debt claim could exceed the true loss (as on the facts assumed here), whereas damages faithfully compensate the contractual position.

Interpretation and the “no advantage from one’s own wrong” maxim. The Sellers argued the MOAs should be construed to disapply the conditions in clause 2 when the Buyers wrongfully prevented fulfilment, invoking a presumption against allowing a party to profit from its own wrong. The court held:

• The presumption, as reflected in authorities like Rede v Farr, New Zealand Shipping, Cheall, and Alghussein, is limited. It concerns reliance on one’s breach to avoid the contract or claim a benefit under it. Here, the Buyers relied defensively on express pre-conditions and did not seek a benefit or termination right; they remained exposed to damages.
• Applying modern objective interpretation, clause 2 states true pre-conditions to the deposit obligation. To treat them as inapplicable in the event of the debtor’s breach would contradict the agreed wording and effectively excise the conditions.
• Commercial dissatisfaction with the timing of deposit security cannot justify re-writing the clause; parties remain free to draft around such risks expressly.

Implied terms. The Sellers proposed several alternative implied terms to overcome the non-fulfilment of clause 2's conditions. The court rejected them because:

• Two formulations would render the obligation unworkable by requiring payment into a non-existent account, contrary to the express structure.
• A third formulation (pay deposit directly to the Sellers) would fundamentally recast the escrow risk-allocation and contradict core express terms (e.g., joint control and release mechanics). Such a material reallocation is neither necessary for business efficacy nor obvious, particularly in a standard-form context.
• Clause 13 already prescribes consequences for failing to lodge the deposit (cancellation and compensation), weighing against implication.

Issue 2 and Issue 2A. In light of the resolution of Issue 1 and Issue 3, it was unnecessary to decide whether “The Griffon” was wrong or whether jurisdictional constraints barred its consideration.

Issue 3A (procedural gateway). The Sellers were permitted to advance their alternative Issue 3 as a respondent’s contention to uphold the result on different grounds without cross-appeal, consistent with the applicable procedural rules. The point was a pure question of law, previously ventilated, and caused no prejudice.

Issue 3 (accrual of the right to the deposit). On the merits, the court held that the MOAs do not distinguish between accrual of the right to the deposit and its payability. The right to the deposit does not accrue at formation; rather, the clause 2 pre-conditions are true conditions precedent to accrual, not merely to payment timing. The court reasoned:

• The language designates the deposit as security, but that status can attach when the stipulated conditions are met; the MOAs lack “deemed earned” or similar wording that would separate accrual from payment (contrast The Dominique and The Karin Vatis).
• Commercial arguments about a “window” before the deposit is secured were accepted as a practical effect of the bargain but not a basis to alter it; buyers remain liable in damages.
• The established Saleform construction in “The Blankenstein” confirms that the deposit obligation only arises when the specified conditions are satisfied. The court endorsed that approach and emphasised stability in standard-form interpretations.

Holding and Implications

HOLDING: APPEAL ALLOWED. The Supreme Court rejects the existence of a general “Mackay v Dick principle of law” in English law. On the proper interpretation of the MOAs, and in the absence of any justified implied term, clause 2’s pre-conditions are genuine conditions precedent to accrual of the deposit debt. The Sellers’ remedy is in damages, not in debt. The court restores the order of the Commercial Court (paras 1–6).

Implications:

• Parties cannot, absent express provision, convert non-fulfilment of a condition precedent caused by the debtor’s breach into a claim in debt by invoking deemed fulfilment, deemed waiver, or quasi-estoppel.
• Saleform deposits: the right to the deposit accrues only when the clause 2 pre-conditions are satisfied; escrow arrangements are not mere payment machinery and should not be re-written by implication.
• The maxim against taking advantage of one’s own wrong remains a limited rule of construction in termination/benefit contexts and does not authorize ignoring express pre-conditions in defensive contexts.
• No broader precedent is set beyond applying orthodox principles of interpretation, implication, and damages; the decision reinforces contractual certainty and the primacy of the parties’ agreed risk allocation. Parties seeking a different outcome should draft explicit terms addressing pre-condition failure caused by debtor breach.