International Finance Corporation v DSNL Offshore Ltd & Ors

Direct payment by a contractor’s employer to a nominated supplier does not, without more, transfer title to the employer or make the goods employer-provided items. Contractual wording, including an entire-agreement or variation clause, must support any such result; later conduct cannot be used to construe the earlier contract, though it may establish variation or estoppel.

An equitable lien may arise over specifically identified, purpose-built goods where payments were made under a contract for work and materials and disposal without reimbursement would be unconscionable. The lien may continue when the goods are incorporated into a larger structure, including where the contractor already owns the structure, unless the beneficiary consented to its extinction.

International Finance Corporation had obtained summary judgment against DSNL Offshore Ltd and sought execution against rig modules and equipment in DSNL’s possession. Chevron Nigeria Ltd claimed title to equipment which it had paid for directly under contractual amendments between Chevron and DSNL. Chevron alternatively claimed an equitable lien over the equipment and the completed modules.

The issues were whether direct payment had transferred title, whether subsequent contractual arrangements or identifying tags altered that position, and whether Chevron acquired or retained an equitable lien notwithstanding incorporation of the equipment into DSNL’s modules.

1. Title. The equipment purchased from Solar remained subject to the original purchase arrangements. Chevron’s direct payments operated as a payment facility, not as a novation or transfer of title. The contractual amendment did not make the equipment “company provided items” under Article 6.1 of the Main Contract. Clause 7 also precluded the implication of an unstated amendment. The alleged security term was unnecessary and commercially unsustainable, because Chevron’s credit exposure had not materially increased.
2. Later amendments which expressly transferred title could not be used to construe the earlier amendment: FL Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235. The later documents and correspondence did not establish a variation or estoppel. The equipment tags identified the items but did not evidence Chevron’s ownership.
3. Equitable lien. Chevron acquired an equitable lien on delivery of the purpose-built Solar equipment. The relevant considerations included the contractual indebtedness arising from Chevron’s payments, the specific identification and appropriation of the equipment to the contract, the bespoke nature of the works, the contractual termination provisions, and whether disposal without reimbursement would be unconscionable. The reasoning in Hewett v Court [1981-2] 149 CLR 639 broadly accorded with English law, while the minority reasoning on the non-existence of property at the date of payment did not.
4. The lien was not extinguished when the equipment was attached to DSNL’s pancakes. DSNL held the equipment, or the composite structure where the equipment was no longer severable, subject to Chevron’s equitable interest. Execution against the topside modules for IFC’s judgment debt could not proceed unless and until Chevron’s lien had been discharged.

First-instance decision in the High Court (Commercial Court). No appellate history is stated in the judgment.