Tradigrain S.A. v King Diamond Shipping S.A. (Spiros C)

JurisdictionEngland & Wales
JudgeLORD JUSTICE RIX,Lord Justice Brooke,Lord Justice Henry
Judgment Date13 July 2000
Judgment citation (vLex)[2000] EWCA Civ J0713-11
Docket NumberCase No: A3/1999/1148 QBCMI
CourtCourt of Appeal (Civil Division)
Date13 July 2000

[2000] EWCA Civ J0713-11




(Mr Justice Colman)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Henry

Lord Justice Brooke and

Lord Justice Rix

Case No: A3/1999/1148 QBCMI

Tradigrain Sa & Ors
King Diamond Marine Limited
"The Spiros C"

Stephen Males QC (instructed by Messrs Richards Butler, London E3 for the Appellant)

Nigel Meeson (instructed by Messrs Hill Dickinson, Liverpool for the Respondent)


Is a shipper liable under his bill of lading contract with a shipowner to pay that owner freight "payable as per" a charter when freight under that charter has already been paid by the time when the shipowner demands payment to himself?


Is a shipowner entitled to demand payment to himself of freight under his bill of lading when that contract stipulates for payment to another party?


Is there an implied term in every bill of lading, in the absence of contrary provision, that the shipper will discharge the goods and will do so in a reasonable time?


These are the three questions which arise on the present appeal from the judgment of Mr Justice Colman. They raise some old problems in novel settings.

The parties and their contracts


The shipowner, King Diamond Marine Limited, is the owner of the vessel Spiros C and the defendant in these proceedings (the "owner"). By a time charter fixture made on 18 February 1998 incorporating the terms of an earlier time charter dated 18 December 1997 the owner let its vessel to Mercator Marine for a period of 6 to 8 months commencing on the day of the fixture. I shall call this fixture the "time charter" and the time charterer "Mercator". The time charter was on the NYPE form, clause 18 of which grants to the owner the familiar "lien upon all cargoes, and all sub-freights, for any amounts due under this Charter". Unfortunately Mercator subsequently became insolvent and the time charter came to an end with outstanding hire payments due from Mercator to the owner.


In the meantime, on 26 February 1998 Mercator entered into a voyage charter with Tradigrain Shipping SA, the third claimant, for a voyage from Rumania to Morocco (the "sub-charter"). This was on the Synacomex 90 form. It contained clauses concerning the payment of freight (clauses 4 and 46), loading and discharging, laytime and demurrage (clauses 5, 8, 9 and 49) and a lien on cargo for freight, deadfreight and demurrage (clause 21). I shall cite the relevant clauses below. For the present, it may be noted that the freight was expressed at a rate per tonne "free in/out", that is to say free of expense to the vessel (clause 5); the freight was payable to a nominated bank and account in the name of a third party "International Navigation Corp" ("INC") and was payable less three itemised deductions (viz, "commissions, loading despatch, and [Mercator's] contribution to extra insurance", clause 46); and the loading and discharging, laytime and demurrage clauses said that the vessel was to be loaded at the expense and risk of "Shippers/Charterers" and discharged at the expense and risk of "Receivers/ Charterers" (clause 5), at the stipulated laytime rates (that for discharge being contained in clause 49), and the demurrage was payable "by Charterers" (clause 9, which also stipulated the demurrage rate of $4,200 per day).


The sub-charter contemplated that two parcels of grain would be loaded, a parcel of 3,800/4,000 tonnes at Constantza and a parcel of 11,000 tonnes at Nikolaiev.


The smaller parcel, which was of wheat, was loaded by 4 March 199Its shipper was Tradigrain SA, the first claimant, presumably an associate company of the sub-charterer, Tradigrain Shipping. The wheat bill of lading was on the Congenbill form. It named the shipper, the consignee box stated simply "to order", but a notify address was given in Casablanca. The port of discharge was given simply as Maroc. The bill stated in three places on its front that freight was payable as per charter party. It was common ground (after an initial dispute at the time of loading, which had to be resolved by an application to the court) that the charter party referred to in this and the other bills of lading issued in respect of the larger parcel, which was of corn, was the sub-charter. The front of the bill referred to Conditions of Carriage overleaf, and clause 1 of those Conditions of Carriage provided, in familiar terms, that –

"1. All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated."


The corn parcel was also loaded in the event at Constantza, and two further bills of lading were issued, dated 16 March 1998. These bills named consignees and gave Casablanca as the port of discharge. Save for such details as were specific to the cargo loaded, these bills were in the same form as the wheat parcel bill. However, the shipper of the corn parcel was the second claimant, Finagrain Compagnie Commerciale Agricole et Financiere SA ("Finagrain").

The claims


Difficulties were experienced at an early stage. Mercator failed, owing hire to the owner, who sought to exercise his time charter lien over sub-freights by notice given to Tradigrain dated 13 March 1998. That was while the vessel was still at Constantza, loading the corn parcel. There is an issue as to whether that notice was in time to intercept the payment of freight under the Tradigrain bill of lading in respect of the wheat parcel. There is no freight issue concerning Finagrain and the corn parcel.


It should be emphasised that the freight claim made by the owner in these proceedings is against Tradigrain and is to bill of lading freight, and is not a claim against Tradigrain Shipping to freight under the sub-charter. In theory the claim could have been put forward in the alternative, against Tradigrain as a direct claim under the bill of lading, and against Tradigrain Shipping as a claim to enforce the time charter lien for sub-freights. It is well established that a lien over sub-freights gives to the shipowner a right, where his time-charterer has defaulted, to step in and claim payment of such sub-freights to himself, provided that they have not already been paid: Tagart, Beaton & Co v. James Fisher & Sons [1903] 1 KB 391, Wehner v. Dene Steamship Co [1905] 2 KB 92, Molthes Rederi Aktieselskabet v. Ellerman's Wilson Line Limited [1927] 1 KB 710. The nature of such right is thought to be an equitable assignment by the time charterer to the shipowner by way of security: see Care Shipping Corporation v. Latin American Shipping Corporation (The Cebu) [1983] 1 Lloyd's Rep 302 and the other cases cited by SCRUTTON on Charterparties, 20th Edition, 1996 at 354, footnote 45. The shipowner perfects his right of lien by giving notice to the debtor: if the notice is in time to pre-empt payment of the relevant sub-freight, then the shipowner is entitled to payment from the debtor, even though he otherwise has no direct contractual relationship with him. But if the shipowner's notice to pay comes too late, and the sub-freight has already been paid, then the lien fails to bite on anything. In the present case, however, whatever may have been the original terms of the owner's notice to pay, the claim before the court is not to a lien over the sub-charter freight, but a direct claim under the bill of lading against the shipper, Tradigrain.


The distinction between the nature of the two claims is referred to by Mr Justice Greer in Molthes Rederi v. Ellerman's at 716/7:

"It is difficult to understand how a shipowner can be said to have a lien on that which, ex hypothesi, is his own property, and which he is entitled to because it is his own. A lien is a claim by a person in possession of the property of another who has the right to keep possession until the owner pays the debt in respect of which the possessor is entitled to the lien. It seems a misuse of words to say that a shipowner has a lien on the debt due to him under the contract made with him by the bill of lading. The lien clause in the charterparty is needed to give the owner a lien in those cases where the sub-freight is due to the charterer and not to the owner, as where goods are carried on a sub-charter without any bill of lading. In such a case the owner could only become entitled to the sub-freight by virtue of the lien clause, and it would be too late to exercise this lien after the debt had been paid to and received by the charterer or through his agent."


The forensic reason on the part of the owner for this choice, to claim directly under the bill of lading rather than by virtue of clause 18 of the time charter, is because by 13 March 1998, when the owner gave his notice that freight should be paid to him, the sub-charter freight on Tradigrain's wheat parcel had already been paid. The owner however submits, and Mr Justice Colman held below, that it had been paid in such a way as not to amount to payment of the bill of lading freight, even though the bill of lading freight was expressed to be "freight payable as per charter party" ie as per the sub-charter, and despite the general incorporation of the sub-charter into the bill of lading.


The facts regarding such payment were these. Clause 46, the freight payment clause of the sub-charter provided as follows:

"95% of freight, less commissions, loading despatch, Owners' contribution to extra insurance, is payable within 3 banking days from signing / releasing 'Clean' Bills of Lading marked 'Freight payable as per Charter-Party' or 'Freight Prepaid'...

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