King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39

Ship buyers failed to provide documentation to open an escrow account, preventing the lodging of deposits under sale contracts. The Supreme Court held that the Mackay v Dick principle of deemed fulfilment of conditions precedent does not form part of English law. The sellers' remedy was in damages only, not debt.

Facts

Three Memoranda of Agreement (MOAs) were concluded between the sellers (Ridgebury November LLC, Ridgebury Sierra LLC, and Makronissos Special Maritime Enterprise) and the buyers (King Crude Carriers SA, Prince Crude Carriers SA, and Zenon Crude Carriers SA) for the sale of three vessels. Under clause 2 of the MOAs, the buyers were obliged to lodge a 10% deposit with a deposit holder within three banking days after the MOA was signed and the deposit holder confirmed that the account was open. The parties were required to provide all necessary documentation to open the account. In breach of contract, the buyers never provided the required documentation, preventing the deposit holder from confirming the account was ready to receive funds. The sellers terminated the contracts and claimed the deposits as debts.

Issues

Primary Issue

Where a party has an obligation to make a payment when a pre-condition is fulfilled, has an obligation to fulfil the pre-condition, but in breach of contract fails to do so, is the pre-condition deemed to be fulfilled so that the other party can claim the payment as a debt? Or must the claim be for damages only?

Secondary Issues

Whether the deposits were forfeited on termination by the sellers, and whether the right to the deposit accrued when the MOA was concluded with the pre-conditions going only to payability rather than accrual.

Judgment

The Supreme Court unanimously allowed the buyers’ appeal, holding that the Mackay v Dick principle of law does not form part of English law. Lord Hamblen and Lord Burrows delivered the joint judgment with which Lord Reed, Lord Hodge and Lord Stephens agreed.

Rejection of the Mackay v Dick Principle

The Court rejected the existence of a principle whereby a condition precedent to a debt obligation is deemed fulfilled when the debtor’s breach prevents its fulfilment. Six main reasons were given:

“First, Lord Watson in Mackay v Dick did not cite or rely upon any English law authorities in support of the principle stated by him. Rather he relied upon what he understood to be ‘a doctrine borrowed from the civil law’.”

“Fourthly, the various formulations or explanations of the Mackay v Dick principle of law are all fictional. Rix LJ explicitly recognised this in Abacha. The language of there being a deemed performance, or a deemed waiver, or a quasi-estoppel immediately makes that clear.”

“Sixthly, the consequence of rejecting Mackay v Dick as a principle of law does not lead to injustice. Subject to terms to the contrary, where a condition precedent has not been fulfilled because of the debtor’s breach of contract, that breach is appropriately and adequately dealt with in English law through the claimant’s remedy in damages.”

Contractual Interpretation and Implied Terms

The Court held that neither contractual interpretation nor an implied term could assist the sellers. The maxim that a party cannot take advantage of its own wrong was held to be of limited application and did not apply where the buyers’ reliance on clause 2 was purely defensive.

“In the present case the Buyers are not relying on their own breach of contract to treat the contract as being at an end or to claim a benefit under it. They are not using it in order to found or to invoke any right under the contract.”

Attempts to formulate implied terms were rejected as either making the contract unworkable or fundamentally rewriting the parties’ bargain.

When the Debt Accrues

The Court rejected the sellers’ argument that the right to the deposit accrued on contract formation, following The Blankenstein. The conditions in clause 2 were conditions precedent to the accrual of the debt, not merely machinery of payment.

Implications

This decision clarifies that English contract law does not recognise a principle of deemed fulfilment of conditions precedent where the debtor’s breach prevents fulfilment. Parties wronged by such breaches must seek their remedy in damages rather than claiming the sum as a debt. This promotes certainty and respect for the terms parties have agreed, whilst ensuring that breach of contract is adequately remedied through compensatory damages. The decision also confirms the importance of established interpretations of standard form commercial contracts.

Verdict: Appeal allowed. The Court restored the order of Dias J, holding that the sellers’ claim must be in damages only and not in debt. The Mackay v Dick principle of deemed fulfilment of conditions precedent does not form part of English law.

Source: King Crude Carriers SA and others v Ridgebury November LLC and others (UKSC/2024/0106)