Today, in King Crude Carriers SA and others (buyers) v Ridgebury November LLC and others (sellers), the Supreme Court unanimously overturned the Court of Appeal’s judgment that the Sellers had claims in debt for deposits to be paid under Memorandum of Agreements (MoAs) for the purchase of three oil tanker ships, which were terminated in 2021.
The underlying disputes arose from contracts for the sale and purchase of three tankers to the Buyers by Ridgebury November LLC and two related sellers. The agreements were based on the industry standard 2012 version of the Norwegian Saleform, and were concluded during the Covid pandemic.
The Buyers did not provide certain documents required to open escrow accounts for the payment of the deposits, leading the Sellers to terminate the MoAs. The Sellers subsequently commenced LMAA arbitrations, seeking payment of the deposits from the Buyers as a claim in debt rather than damages, and it was assumed for the purposes of the arbitration that the Sellers had not suffered damages.
Awards were made in the underlying LMAA arbitrations in 2022, in which the London arbitrators held that the Sellers were entitled to be paid the deposits as a debt. The arbitrators relied upon a legal doctrine, derived from the well-known 19th century Scottish case in the House of Lords, Mackay v Dick (1881) 6 App Cas 251, that allowed for 'deemed fulfilment' of a condition precedent in a contract if one party failed to meet its obligation. Consequently, the London arbitrators found that the pre-conditions for the opening of the escrow account to trigger the deposit becoming due as a debt, could be treated as ‘deemed fulfilled' due to the Buyers’ failure to provide all the necessary documents.
The Buyers successfully appealed the arbitration awards to the Commercial Court in 2023 on the basis that the doctrine of “deemed fulfilment” or “deemed waiver” was based on a legal fiction that was not part of English law. However, the Sellers then succeeded in their appeals to the Court of Appeal in 2024. Subsequently, the Supreme Court permitted the Buyers’ appeals from the Court of Appeal’s judgment, with arguments heard in July 2025.
Charles Weller, partner in Reed Smith’s Transportation Industry Group, said: “Today the Supreme Court acknowledged that this appeal was a relatively rare case where it was required to decide a fundamental and long debated point of principle in the English law of contract, going back some 150 years. Their judgment restores the Commercial Court’s decision and confirms that the Mackay v Dick 'deemed fulfilment' doctrine is a legal fiction which is not part of English law, and the same outcome to dispense with a pre-condition in a contract cannot be achieved by principles of contractual interpretation or implied terms.
Weller added: “The Supreme Court reasoned that the Buyers were not relying upon their own breach of contract to bring the MoAs to an end, such that the principle of construction that a party cannot take advantage of their own wrong was inapplicable here - the Buyers’ reliance upon the conditions precedent in the contract was “purely defensive”. The judgment further clarifies that the deposit terms in Clause 2 of the Norwegian Saleform are not merely 'machinery of payment for an already accrued debt' that became due at the time of contracting, but are conditions precedent to the debt actually becoming due. Therefore, the Sellers’ can only claim damages, not a claim in debt for the deposit.”
Reed Smith partner, Charles Weller, represented the Buyers throughout the English court proceedings and the underlying arbitrations.