Buyers of three vessels failed to provide documentation needed to open escrow accounts for 10% deposits under Norwegian Saleform contracts. The Supreme Court held there is no ‘Mackay v Dick’ principle of deemed fulfilment of conditions precedent in English law, so sellers could only claim damages, not the deposits as debts.
Background
Between 28 and 30 April 2020, the Sellers and the Buyers concluded three Memoranda of Agreement (MOAs) for the sale and purchase of three vessels on the Norwegian Saleform 2012. Under clause 2 of each MOA, the Buyers were obliged to lodge a deposit of 10% of the purchase price with a deposit holder (Holman, Fenwick, Willan Greece) within three banking days after (i) the MOA had been signed and exchanged and (ii) the deposit holder had confirmed in writing that the account had been opened. Both parties were required to provide the deposit holder with all necessary documentation to open and maintain the account without delay.
In breach of clause 2, the Buyers failed to provide the necessary documentation, preventing the accounts from being opened and the deposits from being lodged. In late May and early June 2020, the Sellers terminated the MOAs under clause 13 (Buyers’ default) and claimed the deposits as debts. The assumed facts were that the market price of the vessels upon termination exceeded the contract purchase price, meaning the Sellers suffered no net loss — hence only nominal damages would be recoverable if the claim had to be in damages rather than debt.
The Issue(s)
Issue 1 (Primary Issue): The Mackay v Dick Principle
The central question was whether, where a party has an obligation to make a payment when a pre-condition is fulfilled, and has an obligation to fulfil the pre-condition but fails in breach of contract to do so, the pre-condition is deemed to be fulfilled so that the other party can claim the payment as a debt — or whether the claim must be in damages only. This is the so-called ‘Mackay v Dick principle of law’, derived from Lord Watson’s speech in Mackay v Dick (1881) 6 App Cas 251.
Issue 2 (Buyers’ Secondary Case)
Whether, even if the right to the deposits had accrued, the deposits were not forfeitable on termination by the Sellers — requiring a challenge to the Court of Appeal’s decision in The Griffon [2013] EWCA Civ 1567.
Issue 3 (Sellers’ Secondary Case)
Whether the right to the deposit accrued when the MOA was concluded, with the stipulated conditions going only to the time for payment of an already accrued debt — potentially requiring a challenge to The Blankenstein [1985] 1 WLR 435.
The Parties’ Key Arguments
The Sellers’ Case
The Sellers contended that, applying the Mackay v Dick principle, the pre-conditions to payment should be deemed fulfilled because the Buyers’ own breach prevented their fulfilment. They relied on four main authorities (Hotham, Panamena, Cory, and Abacha) and numerous obiter dicta. Alternatively, they argued the principle could be sustained through contractual interpretation (based on the maxim that a party should not take advantage of its own wrong) or an implied term. As a further alternative, they argued the deposit accrued as a debt upon conclusion of the MOA, with the clause 2 conditions being mere payment machinery.
The Buyers’ Case
The Buyers argued there was no such principle of law in English law, relying on Thompson v ASDA-MFI Group plc [1988] 1 Ch 241 and Little v Courage Ltd (1994) 70 P & CR 469. They submitted that the clause 2 conditions were genuine conditions precedent to the accrual of the debt, that the Sellers’ only remedy was in damages, and that the maxim against profiting from one’s own wrong did not apply where the party’s reliance on the condition was purely defensive.
The Court’s Reasoning
Rejection of the Mackay v Dick Principle as a Rule of English Law
The Supreme Court unanimously held that there is no Mackay v Dick principle of law in English law. Lord Hamblen and Lord Burrows (with whom Lord Reed, Lord Hodge and Lord Stephens agreed) gave six main reasons:
First, Lord Watson in Mackay v Dick relied not on English authorities but on a doctrine borrowed from the civil law. Lord Blackburn’s reasoning in the same case — based on an implied duty of co-operation — was different and uncontroversial.
Second, the English authorities did not speak with one voice. While Hotham, Panamena, Cory and Abacha provided some support, Scott J and Millett LJ had persuasively rejected the principle. Moreover, in those four supporting cases, the same results could arguably have been reached through damages.
Third, the principle was contradicted by Colley v Overseas Exporters [1921] 3 KB 302 and would fundamentally undermine established law on the sale of goods if applied to conditions concerning the passing of property. Limiting the principle in a principled manner was problematic. As the court observed:
a supposed general rule which has to be stated in terms which significantly but uncertainly qualify and curtail it does not make for a robust principle of law.
Fourth, all formulations of the principle were fictional:
The language of there being a deemed performance, or a deemed waiver, or a quasi-estoppel immediately makes that clear. In reality, there has been no performance, and the ingredients of a true waiver or of a true estoppel (eg a representation plus reliance) have not been satisfied. Fictions tend to obscure transparent reasoning and, wherever possible, should be removed.
Fifth, English contract law proceeds on the basis of express and implied terms and their proper interpretation, not fictional fulfilment:
This is consistent with the importance which English law attaches to freedom of contract, and to the application and enforcement of the terms of the bargain which the parties have made. This promotes certainty and predictability, which are important considerations, especially in the commercial law context.
Sixth, rejecting the principle did not lead to injustice. The claimant’s remedy in damages was appropriate and adequate:
There is no good reason to strain to uphold a claim for debt where, as illustrated by this case, this involves disregarding the terms of the contract and where, in contrast to damages, allowing the debt claim may exceed the claimant’s net loss.
Rejection of the Interpretation Argument
The Court rejected the argument that the maxim ‘a party cannot take advantage of its own wrong’ provided a basis for interpreting the conditions as inapplicable upon the Buyers’ default. The authorities on that maxim concerned situations where a party relied on its own breach to terminate a contract or to claim a benefit under it. Here, the Buyers’ reliance on clause 2 was purely defensive:
Far from deriving any benefit, Buyers’ breach exposed them to a liability in damages. Nor would they be rid of the contract, since that depended on whether or not Sellers elected to cancel.
The Court held that interpreting clause 2 as not requiring the pre-conditions where the Buyers had defaulted would effectively rewrite what the parties had expressly agreed.
Rejection of the Implied Term Argument
Three possible implied terms were considered and rejected. The first two rendered clause 2 unworkable because there would be no account into which the deposit could be lodged. The third — requiring the Buyers to pay the deposit directly to the Sellers — fundamentally rewrote the contract, converting a protected escrow arrangement into a direct payment, which the court described as a major rebalancing of risk that was neither necessary nor obvious. Furthermore, clause 13 already expressly dealt with the consequences of the Buyers’ failure to lodge the deposit.
Issue 3: The Sellers’ Secondary Case
The Court rejected the argument that the right to the deposit accrued upon conclusion of the MOA, with clause 2 conditions going only to payability. It held that this was not a contract where a distinction was drawn between accrual and payability, following and agreeing with The Blankenstein. The deposit holder arrangements could not be regarded as mere payment machinery given their protective function for both parties. The court was also reluctant to disturb a 40-year-old construction of a standard form contract.
Practical Significance
This decision is of major importance for English commercial law. It authoritatively settles a long-debated question by rejecting the Mackay v Dick principle of deemed fulfilment as forming any part of English law. The court confirmed that where a debtor’s breach prevents fulfilment of a condition precedent to a debt obligation, the creditor’s remedy lies in damages, not in a debt claim treating the condition as satisfied. This upholds freedom of contract and the primacy of contractual terms as agreed by the parties.
The decision has particular significance for ship sale and purchase contracts on the Norwegian Saleform, confirming that: (i) the deposit does not accrue as a debt until the stipulated conditions precedent are met; and (ii) the deposit holder escrow arrangements are substantive contractual provisions, not mere payment machinery. Parties wishing to protect against the scenario that arose in this case — where a buyer’s breach prevents fulfilment of conditions precedent to a deposit — should include express contractual provisions addressing that eventuality.
The judgment also reaffirms the reluctance of the Supreme Court to disturb established constructions of standard form commercial contracts, noting that if the business community is dissatisfied with the result, the form can be altered.
Verdict: The Supreme Court unanimously allowed the Buyers’ appeal and restored paragraphs 1 to 6 of the order of Dias J. The Mackay v Dick principle of deemed fulfilment of conditions precedent is not part of English law. The Sellers’ claim for the deposits as debts failed; their remedy lay in damages only. The Sellers’ secondary case — that the right to the deposit accrued upon conclusion of the MOA — was also rejected.
Source: King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39
