16 Apr 2018

ShippingBulletin - April 2018


In this issue:

Bills of lading - claims on behalf of third party

CoMaCo sold a quantity of bananas to Altfadul. On 14 December 2013 CoMaCo voyage chartered the vessel Baltic Strait. The cargo was shipped on the Baltic Strait under bills of lading dated 4 January 2014, with Altfadul as named consignees. The carriers under the bill of lading were also carriers under the charterparty.

On discharge, cargo damage was discovered. Altfadul rejected the cargo under the sale contract, and claimed a refund from CoMaCo. CoMaCo agreed a credit of USD 2,586,105.09 in favour of Altfadul. A near-identical sum (namely, USD 2,586,104.93) was paid by SIAT. (It appears that SIAT were the cargo insurers and that the payment was made to CoMaCo.) Altfadul became lawful holders of the bills of lading with title to sue the carrier.

Altfadul assigned their rights under the bill of lading to CoMaCo, and CoMaCo assigned their rights to SIAT. Accordingly, SIAT had title to sue as assignee of Altfadul's rights. A claim had been brought by Altfadul against the carrier, and SIAT joined the claim as assignee.

The arbitrators awarded Altfadul / SIAT the full value of the cargo damage, namely USD 4,567,351.13. This sum was made up of (a) Altfadul's own loss, which was USD 1,981,246.04 (as it had to give credit for the USD 2,586.105.59 promised by CoMaCo); and (b) the loss suffered by CoMaCo, ie the USD 2,856,105.59 promised to Altfadul. Altfadul claimed this sum on behalf of CoMaCo under Carriage of Goods by Sea Act 1992, s 2(4).

The carrier appealed.

Held (Andrew Baker J):

The carrier's appeal was dismissed and the award upheld (but for different reasons).

  1. Altfadul (and therefore SIAT) was entitled to damages equal to the full value of the cargo damage, irrespective of any recovery or entitlement to recover from the seller CoMaCo. A bill of lading holder suing in contract may recover full damages despite an earlier recovery from an intermediate seller. The bill of lading holder will hold the damages on trust to the extent of the recovery from the seller (R & W Paul v National Steamship (1937) 59 Ll L Rep 28).

  2. In order for a party who has title to sue to claim under s 2(4) on behalf of a party who has suffered loss, it is not necessary that the party suffering loss should previously have held title to sue under the bill of lading. Nothing in the language of s 2(4) suggests such a further requirement.

  3. Where holders of a bill of lading are also charterers (so that the bill of lading is a mere receipt in their hands) the transfer to the charterers of rights of suit under s 2(1) does not entitle them to recover under the bill of lading losses they may have suffered from the carrier.

  4. A claim cannot be made under s 2(4) on behalf of a party who has suffered loss if (as in this case) that party is the charterer of the vessel in respect of the bill of lading voyage so that in the charterer's hands the bill of lading would be a receipt only.

(Evylor Shipping v Altfadul and SIAT (The "Baltic Strait") [2018] EWHC 629 (Comm))




Delivery of cargo without bill of lading - whether letters of indemnity engaged

Shipowners Songa time chartered the chemical tanker Songa Winds to Navig8, who voyage chartered to Glencore. Bills of lading were issued naming Ruchi as notify party. (Glencore had sold a quantity of sunflower seed oil to Aavanti. Aavanti had contracted to sell to Ruchi.)

At the discharge ports in India, the cargo was delivered to Ruchi without production of bills of lading. Aavanti provided a letter of indemnity ("LOI") to Glencore, requesting that delivery be made to Ruchi (or to such party as Glencore believed to be, to represent, or to be acting on behalf of Ruchi). Glencore provided an LOI to Navig8, requesting that delivery be made to Aavanti (or to such party as Navig8 believed to be, to represent, or to be acting on behalf of Aavanti). Navig8 were deemed (by virtue of a provision in the time charter) to have provided an LOI to Songa, requesting that delivery be made to Aavanti (or to such party as Songa believed to be, to represent, or to be acting on behalf of Aavanti).

SocGen, who claimed to be the lawful bill of lading holder, commenced proceedings against Songa for misdelivery. Songa claimed against Navig8 under their LOI and Navig8 claimed against Glencore under their LOI. The issue was whether the Navig8 and Glencore LOIs were engaged.

Held (Andrew Baker J):

The LOIs were engaged. In taking delivery from the vessel Ruchi represented Aavanti (or was acting on behalf of Aavanti) so that delivery was made to Aavanti as requested by the two LOIs.

This conclusion was based on a number of findings of fact, including:

  • There was a standing practice between Aavanti and Ruchi for delivery to be made to Ruchi of cargo sold to it by Aavanti without production of bills of lading, and that practice extended to cases where Ruchi had not paid for the cargo prior to delivery.
  • Ruchi was taken by the vessel's agent (appointed by Navig8) to be the receiver nominated by Aavanti.
  • Aavanti had no office in India and no right to import cargo into India whereas Ruchi had its own designated tanks at the discharge ports.
  • Aavanti had not appointed anyone other than Ruchi to receive the cargo on its behalf.

That conclusion meant that it was unnecessary to reach a conclusion on the belief that Ruchi represented Aavanti. In any event, the Judge held that there was insufficient evidence on that point to deal with it on a summary judgment application.

(Songa Chemicals v Navig8 Chemicals Pool and Navig8 Chemicals Pool v Glencore [2018] EWHC 397 (Comm))




Hague Rules "package or unit" limitation does not apply to bulk cargo

A cargo of fishoil was carried on board the tanker Aqasia under a voyage charterparty which incorporated Article IV of the Hague Rules. Art IV, r 5 states:

“… Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100£ per package or unit, or the equivalent of that sum in other currency ....”

(The wording under the Hague-Visby rules is significantly different.) On arrival at the discharge port, part of the cargo was found to have suffered damage. The charterer claimed damages from the owners. Owners accepted in principle that they were liable, but argued that they were entitled to limit their liability under Art IV, r 5 of the Hague Rules to £100 per mt of the cargo damaged.

At first instance Sir Jeremy Cooke held Art IV, r 5 of the Hague Rules does not apply to bulk cargo, so owners could not rely on it to limit their liability. Owners appealed.

Held (Court of Appeal):

The appeal was dismissed:

  • The clear meaning of "unit" is a physical item of cargo or shipping unit and not a unit of measurement or a freight unit;
  • Accordingly, Article IV rule 5 does not apply to bulk cargo;
  • This view was confirmed by the travaux préparatoires of the Hague Rules and by most of the authorities and textbook and academic commentaries.

(Sea Tank Shipping AS v Vinnlustodin HF [2018] EWCA Civ 276)




Voyage charter - meaning of "always accessible"

The Aconcagua Bay was voyage chartered for the carriage of cargo from the US Gulf. The charter provided:

"Loading port or place … 1 good safe berth always afloat always accessible …"

Whilst the vessel was loading, a bridge and lock were damaged and the vessel was unable to leave the berth for 14 days after she had completed loading. Owners claimed from charterers damages for detention for the period of delay.

The issue was whether the warranty in a voyage charter that the berth is "always accessible" means that the vessel is always able not only to enter, but also to leave, the berth. The arbitrator found that the warranty referred to entry only, and not to departure. Owners appealed.

Held (Robin Knowles J):

The appeal was allowed.

There were authorities on "always accessible" in relation to a vessel's arrival, but none concerning departure.

Where commercial parties have addressed the question of accessibility of a berth, there was no basis for a conclusion that they should be taken to have addressed entry alone. A reasonable commercial party looking at the subject of berthing would bear all aspects in mind and not confine itself to getting into the berth.

The term "reachable on arrival" can be found in some charterparties and clearly applies to arrival only. There is therefore a choice of vocabulary for parties to use: "always accessible" applies to departure as well as entry and "reachable on arrival" applies to entry alone. The phrases "always accessible" and "reachable on arrival" are to the same effect only so far as arrival is concerned.

(Seatrade Group NV v Hakan Agro DMCC sub nom The Aconcagua Bay [2018] EWHC 654 (Comm))




Voyage charter - obligation to commence approach voyage

On 5 January 2015, owners chartered the Pacific Voyager to charterers on the Shellvoy 5 form, for carriage from Rotterdam to the Far East ("the Rotterdam CP"). The Rotterdam CP did not give any ETA at load port, nor any date of expected readiness to load. It did contain a laycan with a cancelling date of 4 February 2015.

On the date when the Rotterdam CP was entered into, the vessel was carrying cargo under a previous CP under which she was to part discharge, transit the Suez Canal, then load part cargo for discharge at Antifer, Le Havre ("the Antifer CP").

The Rotterdam CP included under the heading "Position/Readiness" the following details of the anticipated timetable for completion of the Antifer CP voyage:






On 12 January 2015, the vessel suffered a casualty in the Suez Canal, and had to be drydocked for repairs which would take months. Charterers terminated the Rotterdam CP on 6 February 2015 under the cancelling clause.

Charterers sued for damages. They argued that owners were in breach of an absolute obligation to commence the approach voyage to Rotterdam by the cancelling date.

Held (Popplewell J):

  1. Owners were liable (although for slightly different reasons than those submitted by charterers):

    1.1 There was an absolute obligation on the owners to commence the approach voyage to Rotterdam by a particular point of time.

    1.2 That time was to be a reasonable time, and was determined in the light of the other Rotterdam CP terms.

    1.3 In the Rotterdam CP the owners gave intermediate port estimates which involved the vessel arriving at Antifer on 25 January 2015 for final discharge under the Antifer CP. At Antifer the vessel would take a reasonable time to discharge.

    1.4 Accordingly, under the Rotterdam CP the owners were under an absolute obligation to commence the approach voyage to Rotterdam at the end of a reasonable discharging period if the vessel were to arrive for final discharge at Antifer on 25 January 2015. Owners were in breach of that obligation.
  2. The Judge also stated (obiter) that had there been no ETAs for the intermediate port arrivals under the Antifer CP he would have held that there was an absolute obligation under the Rotterdam CP to commence the approach voyage by a date when it was reasonably certain that the vessel would arrive at the loading port by the cancelling date.

(CSSA Chartering and Shipping Services S.A. v Mitsui OSK Lines Ltd [2017] EWHC 2579 (Comm))




Court order for sale of cargo subject to lien - Arbitration Act, s 44

The claimant owner of the Moscow Stars chartered the vessel to PDVSA on a time charter in October 2016. The charterparty provided that the owner had a lien on all sums due under the charter. A cargo of crude oil was loaded on 14 October 2016 in Venezuela for discharge in Freeport, Bahamas. On 18 October 2016 the owner gave notice to exercise a lien over the cargo, alleging that there was an outstanding balance of hire of US$4.5 million. The vessel later sailed to Curacao and was still there at the time of the judgment.

On 26 November 2016 a further notice of lien was served by the owner. Some payments of hire had been made by PDVSA but further hire payments continued to accrue and there were still significant arrears.

The owner commenced arbitration against charterers claiming US$7.7 million, mainly in unpaid hire. The owner obtained permission from the tribunal to apply to the Court under Arbitration Act 1996, s 44 for an order for sale of the cargo.

By the time of the Court hearing the cargo had also been arrested by a number of other parties. Aside from the costs being incurred, the vessel was due in dry dock in January 2018 for SOLAS and Class inspections, and needed to be cargo-free in advance of that date.

The arbitration hearing was held in July 2017, but the award had not been handed down at the time of the Court judgment.

Held (Males J):

  1. The order for sale of the cargo was granted.

  2. The Court had the power to make an order for sale of goods only if they were "the subject of the proceedings". It was not sufficient that the goods were related to the arbitral proceedings in some way: a closer nexus between the cargo and the arbitral proceedings was required. The paradigm case is where the ownership of the goods is in dispute. But there was sufficient nexus where (as in this case) a contractual lien was being exercised over a defendant's goods as security for a claim which was being advanced in arbitration. (In this case the defendant was the owner of the cargo. The Judge stated that he was not considering what the position would be if the cargo were owned by a third party who was not a party to the arbitration.) 

  3. The power to order a sale existed where the relevant property was "of a perishable nature or which for any other good reason it is desirable to sell quickly". In the present case the cargo was not perishable. However, there was no doubt that the sale of the cargo should be ordered. The discretionary factors pointed overwhelmingly to that conclusion:

    3.1 The cargo had been on board for nine months and was likely to be so for many more months, even if there was an award to be enforced.

    3.2 That prejudiced the claimant who was receiving no hire, was incurring operating expenses, and was faced with deadlines to comply with SOLAS and Class requirements.

    3.3 The defendant would suffer little or no prejudice, in particular where there was no viable alternative such as discharge into storage.

    3.4 If the cargo was sold, the goods would effectively be turned into money for the benefit of all parties.

  4. The Court had the power to direct the defendant to sign any sale contract as seller, in order to give effect to the order for sale.

(Dainford Navigation Inc v PDVSA Petroleo SA (The "Moscow Stars") [2017] EWHC 2150 (Comm))




Arbitrator - whether specialist QC qualified

The parties entered into a reinsurance contract that incorporated the arbitration clause in the Joint Excess Loss Committee, Excess Loss Clauses. Clause 15.5 provided that:

"Unless the parties otherwise agree the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance."

One party appointed Alistair Schaff QC as one of the arbitrators. The other party applied for an order that he be removed.

At first instance Teare J granted the order. He held that although Alistair Schaff QC had considerably more than 10 years' experience in insurance and reinsurance law, he was not qualified as an arbitrator within the meaning of clause 15.5. The judge felt bound to follow the decision of Morison J in Company X v Company Y, 17 July 2000. In that case Morison J had held that the words meant that the parties required a "trade arbitration", ie that the tribunal was to consist of persons from the trade or business of insurance and reinsurance. A QC with considerable experience of insurance or reinsurance law did not fall within this group.

The party who had appointed Alistair Schaff QC appealed.

Held (Court of Appeal):

The appeal was allowed. Company X v Company Y was wrongly decided. There was no such thing as insurance or reinsurance "itself" which was distinct from the law of insurance and reinsurance. Unless the parties had some special reason to exclude lawyers, a barrister specialising in the field of insurance and reinsurance for more than 10 years would naturally be regarded as qualified for appointment as an arbitrator. If the intention were to restrict the parties' freedom of choice by excluding such a person, clear words would be needed.

(Since this dispute arose, the JELC Clauses have been amended so that arbitrators must be persons "with not less than 10 years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisors serving the industry".)

(Allianz Insurance PLC v Tonicstar Ltd v Allianz Insurance PLC [2018] EWCA Civ 434)




Termination of Crewman crew management agreement - payment due to crew

Shipowners entered into crew management agreements on the Crewman B forms. On 30 January 2015 owners gave notice to terminate under cl 14, which provided for a 3-month notice period and that crewing fees were payable for the entirety of that period.

The 3 months were due to expire on 30 April 2015, but before that date the owners sold the vessel. Cl 15 provided for automatic termination if owners sold the vessel, and for payment of a 2-month lump sum once the crew had left the vessel. Crew managers invoiced owners for that lump sum, and owners paid. Owners then claimed repayment of that lump sum, on the basis that it had been paid by mistake.

The arbitral tribunal held that crew managers were not entitled to the lump sum payable under cl 15, as termination had been under cl 14. Cl 15 had no application as the contract had already been terminated. The crew managers appealed.

Held (Cockerill J):

The appeal was allowed.

The issue was whether the contracts were terminated pursuant to cl 14 or cl 15. Cl 14 provided that termination would occur 3 months after the notice. That made it clear that the contract continued until that period expired. Reading the clauses together it was implausible that cl 15 rights were taken away where notice to terminate was given under cl 14. The balance of uncommerciality changed as the notice period proceeded: for example, if notice to terminate was given under cl 14 and the vessel was sold on the following day, then crew managers would receive 2 months' fees instead of 3 months'.

(Uniteam Marine Shipping v MS "United Tenorio" Schiffahrtsgesellschaft, unreported, 23 March 2018, Cockerill J)





Joanne Champkins

Joanne Champkins
Senior knowledge development lawyer

T:  +44 20 7809 2623 M:  +44 7825 625 900 Email Joanne | Vcard Office:  London

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