Deposits, debt and deemed fulfilment: The Supreme Court sinks Mackay v Dick

Summary

In its judgment in King Crude Carriers SA v Ridgebury November LLC [2025] UKSC 39 the Supreme Court confirmed that the doctrine of “deemed fulfilment” derived from the Scottish case Mackay v Dick (1881) 6 App Cas 251 does not form part of English law. The “Mackay v Dick” principle held that a condition precedent in a contract giving rise to a debt should be considered fulfilled where the party owning that debt wrongfully prevented the fulfillment of the condition precedent. 

The Supreme Court reversed the Court of Appeal’s ruling and restored the Commercial Court’s decision, holding that the unpaid deposits under various Memorandum of Agreement (“MoA”) made in varied Norwegian Saleform 2012 terms did not constitute debts. Saleform is the Norwegian Shipbrokers' Association's standard international MoA for the sale and purchase of ships.

Background

In April 2020, the Buyers (King Crude Carriers SA and others) and the Sellers (Ridgebury November LLC and others) agreed the sale and purchase of vessels by way of the MoAs.

The Buyers breached their contractual obligations by failing to provide the necessary documentation to enable an escrow account to be opened and subsequently failed to pay the deposits.

In May and June 2020, the Sellers terminated the MoAs as the deposits had not been paid.

Arbitrations

In arbitration, the Sellers contended that they had a right to claim the deposits as debts on both primary and alternative bases.

Primary case: the basis of the Sellers’ primary case (accepted by the Buyers) was that payment of the deposit under clause 2 of the MoA was subject to a number of conditions precedent:

• Signature and exchange of the MoA;
• The provision of all necessary documentation to the deposit holder, HFW;
• HFW’s confirmation that the escrow account was open and ready to receive funds; and
• The lapse of three banking days thereafter.

The Buyers only satisfied the first condition by signing the MoA.

The Sellers relied on Mackay v Dick, arguing that the conditions precedent should be deemed to have been waived or fulfilled where the Buyers breached the contract as they should not benefit from their own breach.

Alternative case: the Sellers contended that the deposits accrued were due on signing the MoA. They characterised the contractual provisions concerning the escrow arrangement as “mere machinery” which “could be dispensed with if necessary”.

The tribunals (by a majority) ruled in the Sellers’ favour. The Buyers appealed.

Commercial Court and Court of Appeal Decisions 

The Commercial Court allowed the Buyers’ appeal, finding that the doctrine of “deemed fulfilment” did not form part of English law. The Commercial Court rejected the Sellers’ submission that the escrow arrangement under the MoA was “mere machinery”. Even if the Buyers had provided the required documentation, contingencies could have prevented the account from being opened. Such contingencies could not be ignored in determining conditions precedent. The Commercial Court therefore held that the Sellers were not entitled to recover the deposits as a debt, though they had recourse to damages for loss of bargain.

The Sellers appealed, the Court of Appeal ruled in their favour. The Buyers appealed.

The Supreme Court

Key Issues

1. Did the Mackay v Dick principle apply in English law?
2. If not, was there a contractual interpretation or an implied term that would lead to the same result on the facts?
3. At what point did the deposit accrue as a debt?

Issue 1: the Mackay v Dick Principle

The Court held that the Mackay v Dick principle does not form part of English law because:

• Lord Watson did not cite or rely on any English law authorities to support the principle.
• Only some cases support such a principle of law. Additionally, in the cases relied upon by the Sellers’ Counsel, one could achieve the same result by applying the law on damages for breach of contract.
• Colley v Overseas Exporters [1921] 3 KB 302 contradicts the Mackay v Dick principle. Further, it does not make a robust principle of law due to the uncertainty of its exceptions, which Popplewell LJ recognised.
• The explanations of the Mackay v Dick principle are legal fictions. There is no convincing explanation for Mackay v Dick as a principle of law.
• The English law of contract is based on the contractual terms and the proper interpretation of such terms, not on the fictional fulfilment of a condition precedent.
• Rejecting Mackay v Dick as a principle of law would not lead to injustice as remedy in damages is available.

Issue 2: Contractual Interpretation and Implied Terms

Regarding contractual interpretation, the Court held that the Buyers’ reliance on clause 2 was “purely defensive”: they accepted liability for damages but that liability relied upon satisfying all relevant conditions precedent.

The Court held that the Sellers’ contended implied terms would be inconsistent with the express terms agreed and amount to rewriting the agreement.

Issue 3: Deposit Accrual

The Court held that the accrual of the debt depended on satisfaction of clause 2 pre-conditions, not when the MoA was concluded.

The Decision

The Court unanimously allowed the Buyers’ appeal. . 

Key Takeaways

• The Scottish doctrine of Mackay v Dick is not part of English law.
• Obligations subject to conditions precedent only accrue when those conditions are satisfied.
• When the deposit is not yet accrued, the Sellers’ remedy lies in damages for loss of bargain, not in debt claims.
• Draft deposit clauses with precision. If deposits are intended to accrue immediately, this must be expressly stated.