Canpotex Shipping Services Limited v. Marine Petrobulk Ltd.

In Admiralty Jurisdiction on (Updated )

Précis: The Federal Court found that the sale of marine bunkers was subject to the standard terms and conditions of the defendant supplier where no objection to those terms was raised by the parties to the original Fixed Price Agreement contract, and ordered the plaintiff to pay the supplier with money held in trust, as well as the receiver of the bankrupt bunker company.

Facts:After the Federal Court of Appeal determined that the trial Judge erred in applying the Fixed Price Agreement to Canpotex’s bunker purchases, this matter was re-heard to determine which party was entitled to payment of funds held in trust. The factual background to this case is important: Canpotex Shipping Services Ltd. (“Canpotex”) and O.W. Supply & Trading A/S agreed to a fixed price trading agreement for marine bunkers (the “Fixed Price Agreement”). Canpotex then obtained bunkers from O.W. Bunkers (U.K.) Ltd. (“O.W.”) for the MV Ken Star and MV Star Jing which were chartered by Canpotex (the “Vessels”). Both charter contracts provided that Canpotex will pay for all fuel and will not allow any liens against the Vessels. The bunkers were physically supplied by the defendant, Marine Petrobulk Ltd. (“M.P.”), who was to deliver the bunkers to the Vessels in Vancouver. M.P. invoiced O.W. who then invoiced Canpotex. Before those invoices were paid, O.W. went bankrupt. ING Bank, receivers for O.W., were to collect any sums outstanding. M.P. and ING claimed entitlement to the amounts owed by Canpotex for the bunkers. M.P. registered a maritime lien against the Vessels and bunkers, upon which Canpotex paid the outstanding amount of $661,050.63 USD into trust.

In the first decision, the Federal Court ([2015] F.C. 1108) determined that M.P. should be paid out of the funds, and ordered that Canpotex pay ING for the markup in price between O.W. to M.P. Thus, Canpotex’s liabilities were extinguished, including the liens.

The matter was appealed to the Federal Court of Appeal ([2017] FCA 47) which held the Federal Court erred in applying the Fixed Price Agreement to the Canpotex purchase, holding further that O.W.’s standard terms and conditions applied to the purchases.

Decision: The Federal Court maintained the same outcome for payment of the money in trust as it decided in the first decision.

Held: The Federal Court relied on a specific provision of M.P.’s terms and conditions which had the effect of variating the terms and conditions when the supply of the bunkers is provided by a third party, such as in this case. Therefore the plaintiff was bound by M.P.’s terms and conditions. After review, the Federal Court held that M.P. insisted, required or demanded that the bunker delivery was to be done on its own terms and conditions, and in the absence of any objection by the plaintiff or O.W., the terms and conditions applied to the transaction. The Federal Court held that the funds in trust would be paid out in the same manner as the first decision, ordering Canpotex pay M.P. out of trust and pay ING for the markup.