Dry Bulk Handy Holding Inc. v Fayette International Holdings Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Andrew Smith J,Pill,Toulson,Tomlinson L JJ |
| Judgment Date | 14 March 2013 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 March 2013 |
Queen's Bench Division (Commercial Court)
Court of Appeal (Civil Division).
Andrew Smith J; Pill, Toulson and Tomlinson L JJ.
John Bignall (instructed by Hill Dickinson LLP) for the claimants/respondents.
Dominic Happé (instructed by Eversheds LLP) for the defendants/appellants.
The following cases were referred to in the judgment of Andrew Smith J:
Agnew v IR CommrsELR [2001] 2 AC 710.
Albemarle Supply Co Ltd v Hind & CoELR [1928] 1 KB 307.
Bank of Boston Connecticut (formerly Colonial Bank) v European Grain & Shipping Ltd (The Dominique)UNK [1988] 1 Ll Rep 215; [1989] AC 1056 (HL).
Benedetti v SawirisUNK [2010] EWCA Civ 1427.
Business Computers Ltd v Anglo-African Leasing LtdWLR [1977] 1 WLR 578.
Care Shipping Corp v Itex Itagrani Export SA (The Cebu) (No. 2)ELR [1993] QB 1.
Care Shipping Corp v Latin America Shipping Corp (The Cebu)ELR [1983] QB 1005.
China-Pacific SA v Food Corp of India (The Winson)ELR [1982] AC 939.
Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] CLC 1100.
Dearle v HallENR (1828) 3 Russ 1; 38 ER 475.
Deutsche Morgan Grenfell Group plc v IR CommrsUNK [2006] UKHL 49.
Ellerman Lines Ltd v Lancaster Maritime Co Ltd (The Lancaster)UNK [1980] 2 Ll Rep 497. ENE 1
Kos Ltd v Petroleo Brasileiro SA Petrobras (The Kos)UNK [2009] EWHC 1843 (Comm); [2012] UKSC 17 (SC); [2013] 1 CLC 1.
Federal Commerce and Navigation Inc v Molena Alpha Inc (The Nanfri)UNK [1978] 1 Ll Rep 581; [1978] QB 927 (CA); [1979] AC 757 (HL).
Ferrexpo AG v Gilson Investments LtdUNK [2012] EWHC 721 (Comm); [2012] 1 CLC 645.
Gaudet v Brown (Cargo ex Argos)ELR (1873) LR 5 PC 134.
Hughes v Pump House Hotel Co LtdELR [1902] 2 KB 190.
India Steamship Co v Louis Dreyfus Sugar Ltd (Indian Reliance) [1997] CLC 11.
Inman SS Co Ltd v BischoffELR (1882) 7 App Cas 670.
Ipswich Permanent Money Club v ArthyELR [1920] 2 Ch 257.
James Talcott Ltd v John Lewis & Co LtdUNK [1940] 3 All ER 592.
Lune Metal Products Ltd (in administration), ReUNK [2006] EWCA Civ 1720.
Molthes Rederi Aktieselskabet v Ellerman's Wilson Line LtdELR [1927] 1 KB 710.
Mutual Export Corp v Australian Express Ltd (The Lakatoi Express) (1990) 19 NSWLR 285.
Roxburghe v CoxELR (1881) 17 Ch D 520.
Seven Seas Transportation v Atlantic Shipping Co SAUNK [1975] 2 Ll Rep 188.
Smith v Owners of SS ZigurdsELR [1934] AC 209.
Somerset v CoxENR (1865) 33 Beav 634; 55 ER 514.
Synthon BV v Smithkline Beecham plcUNK [2005] UKHL 59.
Tradigrain SA v King Diamond Marine Ltd (The Spiros C) [1999] CLC 1136; [2000] CLC 1503 (CA).
Tropwood AG of Zug v Jade Enterprises Ltd (The Tropwind) (No. 2)UNK [1981] 1 Ll Rep 45; [1982] 1 Ll Rep 232 (CA).
Wehner v Dene Steam Shipping CoELR [1905] 2 KB 92.
Western Bulk Shipowning III A/S v Carbofer Maritime Trading ApS (The Western Moscow)UNK [2012] EWHC 1224 (Comm); [2012] 1 CLC 954.
WF Harrison & Co Ltd v BurkeWLR [1956] 1 WLR 419.
Whittingstall v King (1882) 46 LT 520.
William Brandt's Sons & Co v Dunlop Rubber CoELR [1905] AC 454.
The following cases were referred to in the judgment of Tomlinson LJ:
Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] CLC 1100.
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc (The Nanfri)ELR [1979] AC 757.
Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade)UNK [1983] 2 Ll Rep 253.
Tradigrain SA v King Diamond Shipping Ltd (The Spiros C) [2000] CLC 1503.
Wehner v Dene Steam Shipping CoELR [1905] 2 KB 92.
Shipping — Freight — Notice — Lien — Hire — Time charters — Bill of lading freight — Head charter on NYPE form — Sub-time charter on back to back terms — Voyage charter on Gencon form — Bills of lading issued on Congenbill form for cargo of steel — Freight payable as per voyage charter — Intermediate time charterer failed to pay hire — Owners served notice of lien on sub-charterer — Intermediate time charterer insolvent — Shipowner entitled to demand payment of freight under bill of lading before freight paid to sub-charterer — Contract contained in or evidenced by owner's bill of lading directing payment to third party to be construed as one to pay third party or as owner directed — Shipowner not obliged to wait for default by charterer — Notices sufficient to require payment of freight to owner — Implied request by sub-charterer to owners to continue voyage in return for reasonable remuneration.
This was an appeal by sub-charterers from a decision of Andrew Smith J in relation to the shipowners' claim for hire and freight after the intermediate charterer had failed to pay hire.
The head owner, Dry Bulk, time chartered a bulk carrier to CSAV. The vessel was then chartered on the NYPE form to KLC on essentially back to back terms. Clause 18 of the charter provided for the owner to have a lien on cargoes and sub-freights. KLC let the vessel on a trip time charter to Fayette on back to back terms and Fayette entered into a voyage charterparty on the Gencon form with Metinvest for the carriage of steel products from Sevastopol and Odessa to Jakarta and Port Kelang.
Three bills of lading naming Metinvest as shippers were signed by Fayette as agent for and on behalf of the master, and it was common ground that they were owners' bills, evidencing a contract of carriage between the owners and Metinvest. Under the bills of lading the freight was payable “as per [the voyage] charterparty”.
KLC failed to pay instalments of hire and Dry Bulk sent to Fayette and Metinvest a notice of lien requesting them to confirm the amount of freight and/ or hire due from them and to make payment directly to Dry Bulk. A few days later Dry Bulk sent a second notice extending the lien to the cargo. Receivers were appointed to KLC in Korea and Dry Bulk withdrew the vessel from KLC's service.
Dry Bulk and CSAV brought claims against Fayette and Metinvest, relating both to the period when the vessel was hired to KLC, and to the period between withdrawal of the vessel from KLC's service and redelivery of the vessel after discharge of the cargo.
The claimants said that (i) in respect of the period of KLC's hire, they were entitled under the lien clause in the charterparty with KLC to hire from Fayette and freight from Metinvest; (ii) Fayette and Metinvest were liable to pay them in respect of the period after the vessel was withdrawn from KLC's service either because they agreed to pay hire for the voyage to be completed or by way of a quantum meruit; (iii) Metinvest was liable to pay them freight under the bills of lading.
The judge held that the claimants were entitled to demand payment of freight under the bills of lading from Metinvest before it had been paid to Fayette, and that the two notices were effective to require payment of bill of lading freight to them; the lien clause did not, on its proper interpretation, provide for a lien over the hire payable by Fayette under the trip charterparty; the lien claim against Metinvest for sub-freight succeeded; and the post-withdrawal claim against Fayette succeeded on a quantum meruit basis.
On appeal the sub-charterers argued that the head owners were not entitled to require Metinvest to pay bill of lading freight direct to them, because the bills of lading issued with their authority directed payment to Fayette as per the voyage charterparty. The notice of lien and the notice of lien on cargo were effective as an exercise by owners of their lien over the sub-freight due from Metinvest to Fayette under the voyage charterparty, but did not on their true construction require payment of bill of lading freight by Metinvest to owners; that was a real distinction because the lien could only be exercised up to the amount owing from KLC to the owners under the head charter, and that was considerably less than the voyage charter and the bill of lading freight.
Held, dismissing the appeal:
1. It had long been established and recognised that a shipowner could intercept to claim his freight directly from the shipper at any time before it had been paid. It should not be inferred that owners, by authorising their charterers to issue bills of lading directing payment to a third party, had given up their right to receive bill of lading freight. Properly analysed the contract between the shipowner and the shipper was not a contract by which the shipowner contracted to provide a service to the shipper in consideration of the shipper promising to confer a benefit, in the form of payment of freight, on an independent third party, but rather the nominated recipient was, as between the shipowner and the shipper, to be regarded as the shipowner's agent. That analysis did not preclude the shipowner from cancelling his nominated agent's authority to act on his behalf in receiving the freight, before such payment had been made, and requiring it to be made to himself. There was no basis for concluding that the shipowner's right to require payment of the bill of lading freight to himself, as the person obliged to render the contractual services, could be regarded as conditional upon an intermediate charterer having defaulted in his obligations. There was no difficulty as a matter of law in the shipowner countermanding his direction to the shipper to pay freight to a third party provided that he did so before the shipper had made the payment as initially directed. The contrary arguments were ones of practicality and convenience. It was clear that in principle the shipowner would have to account for any bill of lading freight collected which exceeded the hire due and unpaid under the head charterparty. It had to be borne in mind that the position was different as between the owner and the shipper and the owner and the time charterer. It was arguable that a time charterer who was not in default of his obligation to pay hire and other amounts under the head charter could restrain a shipowner from demanding...
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