King Crude Carriers SA & Ors v Ridgebury November LLC & Ors

Where a contractual debt is conditional on an event and the obligor, in breach, prevents the condition from occurring, the obligor cannot rely on its own breach to defeat the debt. The condition may be treated as fulfilled or dispensed with, leaving the claimant entitled to sue in debt rather than only in damages. The principle applies to conditions affecting both accrual and payability. It does not apply to performance of a principal obligation by the claimant or to an essential ingredient of the cause of action. The principle reflects presumed contractual intention, subject to a sufficiently clear contrary intention or circumstances making it inappropriate. Causation remains necessary: the breach must have caused the condition to remain unfulfilled.

The appeal arose from three materially identical ship-sale agreements. The buyers were required to provide documents enabling escrow accounts to be opened and deposits to be paid. They failed to do so, and the deposits were not paid. The sellers terminated the agreements and claimed the deposits as debts, alternatively claiming damages.

The arbitral majority held that the conditions precedent had been prevented by the buyers’ breaches and awarded the deposits as debts. The High Court, on an appeal under section 69 of the Arbitration Act 1996, held that the claim lay in damages instead and remitted a separate no-loss issue under section 68. The central issue was whether the buyers’ breach caused the payment conditions to be treated as fulfilled.

1. Appeal allowed. Popplewell LJ delivered the leading judgment, with which Nugee LJ and Falk LJ agreed.
2. An action in debt enforces a primary obligation to pay money and is non-compensatory. Damages arise as a secondary remedy for breach and are generally compensatory. A debt may have accrued without yet being payable, but both accrual and enforceability depend on the contractual terms.
3. The court followed the principle expressed by Lord Watson in Mackay v Dick (1881) 6 App Cas 251. An obligor who, by breach of contract, causes a condition precedent to its debt obligation to remain unfulfilled cannot rely on that non-fulfilment. The condition may be treated as fulfilled, dispensed with, or the obligor may be precluded from relying on it. The principle applies whether the condition concerns accrual of the debt or its payability. It was supported by Panamena [1947] AC 428 and Cory v LRB (unreported 5 November 1990), both binding on the court.
4. The principle is founded on presumed contractual intention, not a freestanding rule that universally prevents a party benefiting from its own wrong. It requires an agreement capable of creating a debt, a condition precedent to accrual or payability, and an express or implied obligation not to prevent fulfilment. The principle is excluded where a sufficiently clear contrary intention appears, or where the condition concerns performance of a principal obligation by the obligee or an essential ingredient of the cause of action. Causation remains necessary.
5. The buyers’ failure to provide the documents was the cause of the escrow accounts not being opened. The deposits therefore became recoverable as debts. The contractual purpose of the deposits as security and an earnest of performance meant that recovery was not an impermissible windfall or substitute for compensatory damages. The appeal was accordingly allowed.

• Court of Appeal (Civil Division): Allowed the appeal and held that the deposits were recoverable as debts. [2024] EWCA Civ 719
• High Court of Justice, Commercial Court: Dias J allowed the buyers’ appeal under section 69 of the Arbitration Act 1996, holding that the claim lay in damages rather than debt. The court also upheld a section 68 challenge and remitted the no-loss issue. [2023] EWHC 3220 (Comm)
• Arbitral tribunals: The majority held that the buyers could not rely on their breaches to prevent fulfilment of the deposit conditions and awarded the deposits as debts.