Metall Market OOO v Vitorio Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 04 April 2012 |
| Neutral Citation | [2012] EWHC 844 (Comm) |
| Docket Number | Case No: 2011 FOLIO NO.1067 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 April 2012 |
[2012] EWHC 844 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon. Mr Justice Popplewell
Case No: 2011 FOLIO NO.1067
Mr Chirag Karia QC (instructed by Clyde & Co) for the Claimant
Ms Claire Blanchard QC (instructed by Stephenson Harwood) for the Defendant
Hearing dates: 5 & 6 March 2012
Introduction
This is an appeal from an arbitration Award in declaratory form dated 22 July 2011. It is brought with permission under section 69 of the Arbitration Act 1996. The arbitration arose out of the capture of the vessel "Lehmann Timber" (the "Vessel") by Somali pirates on or about 28 May 2008 during her maiden voyage. At the time she was carrying a cargo of steel coils, loaded in China for discharge at St Petersburg, and a deck cargo of hatch covers for discharge in Germany. The Claimant ("MMO"), a Russian company, was the receiver of the steel coils cargo. The Defendant was the demise chartered owner of the Vessel ("Owners").
The steel coils cargo was carried under four bills of lading on the Congenbill 1994 form. Bills of lading numbered 1 (for 215 steel coils) and 3 (for 411 steel coils) were consigned to order, and MMO were the endorsees. Bills of lading numbered 2 (for 365 steel coils) and 4 (for 98 steel coils) were straight bills naming MMO as the consignees. The bills provided for adjustment of General Average in accordance with the York Antwerp Rules in London and incorporated the terms of a voyage charterparty dated 2 April 2008, including its English law and London arbitration provisions.
After 42 days in the hands of the pirates and protracted negotiations, Owners paid a ransom to secure the release of the Vessel and she sailed for Salalah in Oman as a port of refuge on 8 July 2008. Whilst en route the Vessel suffered a main engine breakdown on or about 12 July 2008, and had to be towed into port, where she arrived on 21 July 2008. Owners declared general average. The arbitrators subsequently held that both the payment of the ransom and the cost of the tow to Salalah were allowable general average disbursements; that the total GA disbursements were a little over $3.5 million plus interest, commission and adjusters' fees (reducing it from an equivalent figure of a little over $4 million in the original adjustment); that the value of the cargo for the purposes of the general average adjustment was a little over $6.5m; and that MMO is liable for 28.82931% of the GA disbursements.
Having declared general average, Owners appointed average adjusters, who attempted to collect general average security from cargo interests. Security was sought in the form of a general average bond backed by an insurers' guarantee, or alternatively a cash deposit.
After repairs and a crew change at Salalah, the Vessel made for the discharge ports. The receivers of the hatch covers provided security for general average by the provision of a bond and insurers' guarantee and the hatch covers were delivered to them at the first discharge port in Germany on 9 September 2008. The Vessel then made for St Petersburg where she arrived on 20 September 2008. MMO refused to provide a bond or a cash deposit in respect of any part of the cargo. Only the cargo carried under bill of lading no. 4 (98 coils, about 9% of the cargo) was insured and an insurers' guarantee was provided for that portion of the cargo ("the GA Guarantee"). The Owners continued to demand a GA bond from MMO in respect of that parcel and the other three parcels, and a cash deposit of $920,000 for the lion's share of the cargo not covered by the GA Guarantee. The arbitrators found that the amount and form of the security sought was reasonable. MMO refused to provide any security for any of the four parcels in the form of a GA bond or cash deposit.
Owners exercised their lien. After waiting off St Petersburg until 25 September 2008, Owners took the cargo to a nearby port, Hamina in Finland. After waiting off Hamina for several days, Owners there discharged the cargo into a warehouse, where it remains to this day. Throughout that time Owners have been incurring insurance and storage charges for the cargo of some $20,000 per month and continue to do so.
In the arbitration Owners sought to recover MMO's contribution to general average and the costs of preservation and protection of the cargo, including insurance and storage costs at Hamina, berthing costs, handling charges and legal costs. These were referred to for convenience, but not wholly accurately, as "the storage costs", and I shall refer to them as such in this judgment. MMO denied being under any liability to contribute in general average, and counterclaimed for the alleged conversion of the cargo. The Tribunal found MMO liable for both general average and the storage costs. MMO's counterclaims were all dismissed.
The Award decided a large number of disputes between the parties. MMO now appeals two aspects of that decision. First, MMO says that Owners were obliged to deliver the cargo in respect of which the GA Guarantee was provided (98 coils covered by Bill of Lading no. 4), and are liable in damages for failure to do so. Secondly, MMO says that it is not liable for the storage costs which Owners have incurred in respect of all the steel coils.
The questions of law were framed in these terms.
a. Question 1: Are shipowners (here, the Defendant Owners) entitled to refuse to deliver up cargo covered by a bill of lading (here, 98 steel coils covered by bill of lading No. 4) to the consignees under that bill (here, MMO) in purported exercise of their lien for General Average contribution for that cargo even after they have received and accepted an unlimited General Average guarantee from the insurers of that cargo undertaking, in consideration of the delivery of that cargo to the consignees, to pay the shipowners any General Average contribution due in respect of the cargo?
b. Question 2: Are shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?
The First Question
The Issues
On the first question, the Tribunal held that Owners were entitled to refuse delivery of the 98 coils because they had, and retained, a possessory lien for general average. The Tribunal further held that even if they no longer had such a lien in respect of the 98 coils, they were entitled to decline delivery because the practicalities were such that they could not reasonably have delivered that parcel without risking damage to the other parcels and/or loss of their lien on the other parcels, which made up over 90% of the cargo.
MMO argues that:
a. Owners were obliged to deliver the 98 coils because their lien over those goods had been lost by acceptance of the GA Guarantee. It argues that such lien was lost because the acceptance of security which is inconsistent with retaining such lien operates to discharge it, and the GA Guarantee was inconsistent with retention of the lien because it contained an undertaking to make delivery as consideration for the giving of the guarantee.
b. Without any valid exercise of a lien, there was an absolute obligation in contract to deliver the 98 coils, and a liability also in conversion for failing to do so. No questions of the practicalities of doing so can discharge Owners from such liability.
Owners argue that the decision of the Tribunal was right on both of the two alternative grounds. In particular:
a. Owners were not obliged to deliver the 98 coils because they had and retained a lien over those goods. Such lien was not lost because in this case the Tribunal found that the failure to provide a GA Bond meant that no reasonable security had been tendered. That is a finding of fact for the Tribunal, with which this Court should not interfere, and is in any event a finding which was correct.
b. The GA Guarantee in this case was not inconsistent with the continued existence of the lien.
c. Alternatively, if the lien was lost in respect of the 98 coils, the Owners were entitled to refuse to deliver. The Tribunal found that they could not in practice do so:
i. without risking damage to the remaining 91% of the cargo and thereby being in breach of their duty of care to the owners of those parcels; and/or
ii. without risking losing their lien over the remaining cargo, a lien which they were not merely entitled to exercise for their own benefit, but obliged to exercise for the benefit of all potential GA claimants with interests in the venture.
In those circumstances Owners contend that they are under no liability in contract or conversion for failure to deliver the 98 coils.
Owners further argue that if they are wrong on both grounds, nevertheless on the Tribunal's findings MMO failed to mitigate its loss by failing to provide a GA Bond for the four parcels and a cash deposit for the three not covered by the GA Guarantee; and that had it done so, the cargo would have been delivered and it would have suffered no loss.
The First Question: discussion
At common law, the obligation to pay general average arises at the time of the sacrifice or expense and rests on the owner of the cargo at that time. That common law position can be, and usually is, modified by contract, by a term in the charterparty or bills of lading (or both). The shipowner has a possessory lien over the cargo, which right accrues at the time of the sacrifice or expense, which is exercisable as...
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