Metall Market OOO v Vitorio Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Bernard Rix,Lady Justice Arden,Lord Justice Patten |
| Judgment Date | 07 June 2013 |
| Neutral Citation | [2013] EWCA Civ 650 |
| Docket Number | Case No: A3/2012/1131 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 June 2013 |
[2013] EWCA Civ 650
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT, QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE POPPLEWELL
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Patten
And
Sir Bernard Rix
Case No: A3/2012/1131
A3/2012/1127
Miss Claire Blanchard QC (instructed by Stephenson Harwood LLP) for the Respondent
Mr Chirag Karia QC (instructed by Clyde & Co) for the Appellant
Hearing dates : Wednesday 21 st November 2012 Thursday 22 nd November 2012
Approved Judgment
This appeal raises two questions of some importance relating to general average. One is whether a shipowner's lien for cargo's general average contribution was waived when the shipowner requested from the consignee of the cargo a bond and insurer's guarantee, or a cash deposit, as the price for giving up his lien, but only received an insurer's guarantee (and that for only a small part of the cargo, carried under one of four bills of lading) and no bond or deposit. The other is whether the exercise by the shipowner of his lien for general average contribution prevented him from recovering the costs involved in exercising that lien in terms of the continuing expense of looking after the cargo instead of being able to discharge it. An arbitrators' award decided both questions in favour of the shipowner. An appeal to the commercial court resulted in the first question being upheld in favour of the shipowner (and thus the consignee's counterclaim in conversion failing), but in the second question being decided in favour of the consignee. The arbitrators' award (their "Second Final Declaratory Award") was dated 22 July 2011 and is the award of Messrs Trevor Harrison, Anthony Scott and Christopher Moss. The commercial court judgment is that of Mr Justice Popplewell, reported at [2012] EWHC 844 (Comm).
The shipowner is Vitorio Shipping Company Limited, the demise chartered owner of the Lehmann Timber (the "owner"). The consignee is Metall Market OOO, a Russian company (the "consignee" or "cargo", referred to as "MMO" in the award). The voyage was from Changsu in China to St Petersburg in Russia, where the consignee's cargo of 1089 steel coils was to have been discharged. A further cargo of hatch covers was loaded on deck at Nantong in China for carriage to Warnemunde in Germany and delivery there to another consignee. We are not concerned with that deck cargo. At the time the vessel was on her maiden voyage, and had been time chartered by the owner to Lehmann Chartering GmbH & Co KG and had been voyage chartered by Lehmann Chartering to Powerful Asia Group Limited of Hong Kong under an amended Gencon charter (the "voyage charter") dated 1 April 2008. (The deck cargo was carried under a separate voyage charter.) The cargo of steel coils (the "cargo") was carried under four separate bills of lading, nos 1, 2, 3 and 4. Bills of lading 1 and 3 were negotiable bills consigned to the order of Bright Universal Group Ltd but named the consignee as the notify party. Bills of lading 2 and 4 were "straight" bills of lading consigned directly to the consignee. Bill of lading 1 was for 215 coils, bill of lading 2 was for 365 coils, bill of lading 3 was for 411 coils, and bill of lading 4 was for 98 coils, ie only some 9% of the total cargo. Only the cargo under bill of lading 4 was insured, which was why an insurer's guarantee was forthcoming for that parcel but none of the others. Although bills of lading 1 and 3 could in theory have been transferred to another party, they were not, so that Metall Market was the consignee of the whole cargo of 1089 steel coils at St Petersburg.
On her voyage from China to Russia the vessel suffered two general average incidents. First, whilst transiting the Gulf of Aden on 28 May 2008, the vessel was captured by pirates and held for 42 days off Somalia until on 8 July 2008 a substantial ransom was paid. Secondly, on her release, the vessel sailed for Salalah in Oman but en route suffered a main engine breakdown and had to be towed to Salalah, where she arrived on 21 July. The owner declared general average and the arbitrators were subsequently to decide that both the payment of the ransom and the cost of the tow were allowable general average disbursements. The arbitrators also held that the total general average disbursements were a little over $3.5 million (plus interest, commission and adjusters' fees) and that the consignee's liability was nearly 29% of that total. Many of those matters were at issue in the arbitration, but no longer are.
After the declaration of general average, the owner appointed Stichling Hahn Hilbrich as average adjusters (the "adjusters"), and the adjusters in turn requested the cargo interests to provide general average security in the form of a general average bond to be signed by the cargo interests themselves and support for the bond in the form of a general average guarantee from cargo insurers or else a cash deposit. The receivers of the hatch covers provided a bond and insurer's guarantee and the hatch covers were delivered to them in Germany on 9 September 2008. The vessel then made for St Petersburg where she arrived off the port on 20 September 2008. However, no bond was provided by the consignee and an insurer's guarantee for only the cargo under bill of lading 4 was forthcoming. No guarantee or deposit was provided for any other part of the consignee's cargo. Repeated requests were made for the missing security but nothing further was supplied. Although there appears to be no finding in the award of when and how the consignee presented bills of lading and requested discharge of the cargo, it seems nevertheless to have been assumed that this was done at some time. The award merely states (at para 2.9): "MMO was eager to obtain delivery of the long-delayed Cargo". However, in the absence of the missing security, the owner was cautious to preserve its lien for general average contribution. The award found that the amount and form of security sought was reasonable, and that the consignee's failure and refusal to provide the missing security were unreasonable and unaccountable.
The owner was unwilling to berth on advice that the vessel would be forced to discharge and it would be impossible in practice to prevent the consignee obtaining possession of the cargo. It was also concerned that it would be forced to berth and discharge. Therefore, after waiting until 25 September off St Petersburg, the owner sailed to nearby Hamina in Finland, where it discharged the cargo into a warehouse, subject to its lien, where it remains to this day. The vessel berthed at Hamina on 1 October and discharged by 8 October 2008. Whilst at Hamina the vessel was arrested (or otherwise detained) at the suit of the consignee, but a successful challenge to that procedure enabled the vessel to leave on 17 October. Insurance and storage charges for the cargo at Hamina have been mounting at some $20,000 per month.
The appealed questions of law
The award (or the first award which preceded it) finally disposed of many issues debated between the parties. The hearing for the second award alone lasted six days. The evidence of thirty witnesses of fact or expert opinion was considered. The range of issues is referred to in para 1.2 of the award and included "issues of seaworthiness, public policy as regards the legitimacy of paying a ransom to pirates, liens, bailment and conversion, the identity of the carrier and title to sue, divergent expert opinion in respect of the causes of mechanical breakdown, the quantum of many sums claimed, the value of the cargo, numerous conflicts in respect of the factual evidence and the difficulty of issuing a final average adjustment when some of the cargo is still, arguably, short of its destination".
The arbitrators' essential findings are encapsulated in the following summary at para 1.15 of their award:
"1. Both the capture by pirates and the subsequent main engine breakdown are well made out instances of general average events;
2. Payment of the ransom and the cost of the tow to Salalah are allowable GA disbursements.
3. The Ship's calls at Salalah and Hamina were not unjustifiable deviations.
4. The Owners have not breached any warranty in respect of seaworthiness or obligation to exercise due diligence.
5. The Owners are entitled to exercise a possessory lien over the Cargo for MMO's contribution to GA disbursements.
6. Although the Owners have no power to compel MMO to provide GA security, their requests for GA security from MMO in the form of a bond supported by an insurer's guarantee or a cash deposit were reasonable in principle, form, amount and circumstance.
7. MMO's failure to discharge the lien by way of GA security or otherwise in respect of the entire Cargo was a breach of its obligation to take delivery pursuant to the contracts of carriage. MMO's refusal to provide GA security other than a guarantee for 9% of the Cargo was unreasonable, incomprehensible and irrational.
8. The actions taken by the Owners to preserve their lien were reasonable, including taking the Cargo to Hamina and placing it in secure storage and not releasing the 98 coils covered by an insurer's guarantee and not releasing a value-related proportion of the balance of the Cargo.
9. MMO's conduct subsequent to the placing of the Cargo in store in Hamina has manifested not merely an abject failure to mitigate any losses they might be suffering as a consequence of being kept from...
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