19 Nov 2015

ShippingBulletin - November 2015


In this issue:

Lien over cargo – storage charges - sale


The claimant, Sang Stone was shipper under a bill of lading and also FOB seller of the cargo to Teda.  The defendant was the carrier under the bill of lading which it issued to Sang Stone on 4 February 2012.  The bill of lading incorporated the terms of a voyage charterparty which provided, in clause 12, that if no bill of lading was produced at the discharge port, the carrier was permitted to warehouse the cargo, with the expenses to be for charterers' account.

Sang Stone and Teda were in dispute over various matters, and Sang Stone refused to transfer the bill of lading to Teda. As at the date of judgment (31 July 2015) Sang Stone still retained the bill of lading.

The vessel arrived at the discharge port on 3 March 2012. Teda were unable to produce the bill of lading and obtain the cargo at the delivery port.  By an email of 6 March 2012 Sang Stone requested the carrier to take "appropriate measures", meaning that the carrier should warehouse the cargo.

The cargo was discharged against letters of indemnity provided by the various charterers in the chain which requested the carrier to discharge the cargo to Star Ship (the agent at the disport), who was to release the cargo against presentation of original bills of lading.  Star Ship arranged for the cargo to be stored in a warehouse operated by TQST. The warehousing terms conferred a lien on TQST for the storage charges.

Sang Stone made no attempt at any time to take delivery of the cargo. As at 31 July 2015, the cargo remained in the warehouse.  Sang Stone remained silent until January 2013, when it arrested the carrier's ship in India.  By agreement, Sang Stone's claim was heard by the High Court in England.

Sang Stone claimed that the carrier was not entitled to arrange for storage in a way which gave rise to a lien in favour of the warehouse owner, and that the creation of this lien constituted a conversion of the cargo.  The carrier counterclaimed for the storage charges.

Held (Males J):

The claim was dismissed and the counterclaim succeeded.


  1. Goods may be converted by a person who creates a lien over them without the authority of the owner.  However, "a goods owner who authorises a bailee to deliver goods into storage must be taken to authorise the creation of a lien where that is a reasonable and foreseeable incident of the storage contract which the bailee is authorised to conclude" (para 48). This is an example of bailment on terms, whereby a head bailor is bound by the terms in a contract between his bailee and a sub-bailee if he has expressly or impliedly consented to those terms.

  2. If the bill of lading holder does not claim delivery within a reasonable time, the master may land and warehouse the cargo. In some circumstances it may be his duty to do so. As a correlative right, the shipowner is entitled to charge the cargo owner with expenses properly incurred in so doing.

  3. It was "the claimant's responsibility as the shipper to whom the bill of lading was issued, and therefore as a party to the bill of lading contract, to take delivery of the cargo" (para 51). In breach of contract it failed to do so, leaving the defendant shipowner with no alternative but to land and store the cargo.

  4. It could not have been suggested that it was unreasonable to agree to a term in the storage contract which conferred a lien on the warehouse company. No sensible warehouse company would agree to store a cargo on terms which did not include such a lien.  In those circumstances the claim for conversion by reason of the creation of a lien must fail. The claimant authorised the storage of the cargo, in clause 12 of the charterparty, by its email of 6 March 2012 and by implication as an aspect of the well-established general law of bailment applicable to the situation where a bill of lading holder fails to take delivery at the discharge port.

  5. In such circumstances the creation of a lien was a reasonable and foreseeable incident of the storage contract which the shipowner was authorised to conclude. In accordance with the principle of sub-bailment on terms the claimant must be taken to have authorised also the creation of that lien.  It did not matter that the carrier did not give notice of what it was intending to do: it had no obligation to do so.

  6. The judge addressed (obiter) the position had the BL holder requested the carrier to warehouse the cargo, but expressly forbidden it to authorise the creation of a lien. He stated that: "Although it could be said in such circumstances that the creation of a lien was not authorised, I find it hard to think that a shipowner who chose the former course, and in so doing was acting reasonably in mitigation of the bill of lading holder's breach, would be liable for conversion."


  1. In concluding the storage contract, Star Ship acted as agent for the carrier, so as to render the carrier liable for the storage charges.  The storage charges were reasonable.

  2. The carrier was also entitled to an order for delivery up of the bill of lading.  It had no alternative but to warehouse the cargo and it thereby incurred liability, which would increase indefinitely unless the cargo could be sold.  The bill of lading was needed to clear the cargo through customs so that it could be sold.

  3. Just as a shipowner has a right to charge the cargo owner with expenses properly incurred in landing and storing the cargo so as to preserve it for the cargo owner, the cargo owner has a continuing duty to take delivery of the cargo once it is landed, and to do what is necessary to co-operate in minimising loss and expense if it is unwilling or unable to do so. On the facts of this case, that required delivery up of the bill of lading.

(Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (The "BAO YUE") [2015] EWHC 2288 (Comm))



Bunker supply contract – nature of contract


A chain of bunker supply contracts was agreed. PST (the owners of the "Res Cogitans") ordered from OWBM, who ordered from OWBAS, who ordered from Rosneft, who ordered from RN-Bunker.

Each contract contained a retention of title clause and a provision for payment to be due a fixed number of days after delivery. Under both the PST-OWBM and OWBM-OWBAS contracts the supplier granted permission for the shipowner to consume the bunkers.

For the purposes of these proceedings it was an assumed fact that the bunkers were entirely consumed prior to the expiry of the 60 day credit period under the PST-OWBM contract, and that Rosneft was aware that the bunkers might be wholly or partly consumed during the 30 day credit period under the OWBAS-Rosneft contract.

On 4 November 2014, the bunkers were physically supplied to the ship by RN-Bunker, a subsidiary of Rosneft. On 6 November 2014, OWBAS became insolvent. They had not paid Rosneft. On 18 November 2014, Rosneft paid RN-Bunker, thus acquiring title to whatever quantity of bunkers had not yet been consumed. Rosneft asserted that it retained property in the bunkers and demanded payment from PST. However, Rosneft took no part in the proceedings.

ING Bank (as assignees from OWBM) commenced arbitral proceedings against PST, claiming the moneys due under the OWBM-PST supply contract. PST denied liability to ING Bank. PST's position was that they did not object to paying for the bunkers, but did not want to have to pay both ING and Rosneft.

In the arbitration, ING Bank were successful in relation to a series of preliminary issues relating to the contractual arrangements between the parties. The tribunal held that the bunker supply contract was not a contract to which the Sale of Goods Act 1979 applied and ING's claim was a straightforward claim in debt, which was not subject to any requirement as to the passing of property in the bunkers to PST at the time of payment. 

High Court

PST appealed to the High Court. Males J rejected their appeal for the following reasons:

  1. The bunker supply contract was not a contract of sale to which the Sale of Goods Act applied. ING's claim to payment was a straightforward claim in debt not subject to any requirement as to the passing of property in the bunkers to the Owners at the time of payment. (para 64)

  2. The effect of consumption of the bunkers was to extinguish any property in them. If, as all parties were aware and accepted might well happen, the bunkers were consumed before the date for payment fell due in accordance with the relevant credit terms, title to the bunkers would by then have ceased to exist.

  3. It was only because of the combination of a retention of title clause and imminent consumption of the goods that the present issue arose.

  4. In order to qualify as a contract of sale within the Act, four conditions must be satisfied:

    4.1 The contract must be for “goods”. 

    4.2 One party, the seller, must undertake an obligation to transfer the property in the goods to the other party, the buyer.

    4.3 There must be a money consideration payable by the buyer to the seller. 

    4.4 There must be a link between the transfer of title and the money consideration, such that the consideration for the payment is the transfer of title to the buyer as distinct from some other benefit: in other words, what the buyer is paying for is title to the goods.

    In the present case the first and third conditions were satisfied. However, the second and fourth conditions were not satisfied. 

  5. The combined effect of (1) the retention of title clause, (2) the period of credit before payment fell due, (3) the permission given to the owners to consume the bunkers, and (4) the fact that some or all of the bunkers supplied were likely to be consumed before the expiry of the credit period (with the consequence that property therein would cease to exist), meant that the parties must be taken to have understood that it was likely that title would never be transferred to the owners. It cannot have been the object of the contract to transfer property from OWBM to PST: both parties knew that this was unlikely ever to happen. Even if it did, because some bunkers remained unconsumed after 60 days, "that was not fundamental to the transaction".

  6. OWBM did not undertake an obligation to transfer the property in the bunkers to the owners. There was no good reason why it should undertake an obligation which both parties knew that it was unlikely to be able to perform. It was equally difficult to conclude that what the owners were paying for was the transfer of title to them, when both parties knew that this was unlikely ever to happen.

  7. "The true nature of the parties’ bargain was that OWBM would deliver or arrange for delivery of the bunkers, which the Owners would be immediately entitled to use for the propulsion of the vessel." (para 46)

  8. There would be a total failure of consideration if OWBM failed to obtain permission of the true owners for the consumption of the bunkers. But on the facts, OWBM had obtained such permission. Rosneft knew and accepted that OWBAS was not an end user but a trader, that it would contract (either directly or indirectly) with the owner of the vessel to which the bunkers would be delivered and that the contract with the owners would authorise them, expressly or by necessary implication, to consume the bunkers immediately. In such circumstances PST could be under no liability to Rosneft as a matter of English law in the tort of conversion because Rosneft knew and agreed that PST would consume the bunkers before they were paid for in accordance with the relevant credit terms.

Court of Appeal:

Owners appealed to the Court of Appeal. The sole issue before the Court of Appeal was "whether OWBM was bound to transfer title in the contract goods" (para 12).


The Court of Appeal dismissed the appeal to the extent of holding that the failure to transfer title in the bunkers did not release the owners from their obligation to pay for them (para 41).

The Court of Appeal held:

  1. Where the Sale of Goods Act applies, the contract will be subject to an implied condition that the seller has a right to sell the goods or will have such a right at the time when property is to pass. An inability to transfer property at the agreed time amounts to a breach of condition and a total failure of consideration. As a result the seller cannot recover the price, or, if he has already received payment, the buyer may recover it (para 17).

  2. However, the present contract was not a contract to which the Sale of Goods Act applied:

    2.1 The contract was one under which goods were to be delivered to the owners as bailees with a licence to consume them for the propulsion of the vessel, coupled with an agreement to sell any quantity remaining at the date of payment, in return for a money consideration which in commercial terms can properly be described as the price. (para 33)

    2.2 The commercial background and the terms of the contract made it clear that what the owners contracted for was not the transfer of property in the whole of the bunkers, but the delivery of a quantity of bunkers which they had an immediate right to use but for which they would not have to pay until the period of credit expired. (para 33)

    2.3 The critical terms were the agreement for 60 days credit and the terms which provided that property in the bunkers was not to pass until they had been paid for in full, but that the owners had the right to use them for the propulsion of the vessel from the moment of delivery. The parties contemplated that a large part, if not all, of the bunkers would or might be consumed within 60 days of delivery and as a result would cease to exist (para 20).

  3. Moore-Bick LJ (with whom the other judges agreed) held that the transfer of property in the bunkers from OWBM to the owners "was not the essential subject matter of the contract" and that a failure to transfer property in the bunkers (all of which had been consumed when the period of credit expired) did not relieve the owners of the obligation to pay for them (para 34).

  4. It may be that in some cases (eg where the parties contemplate that the overwhelming majority of the goods will continue to exist at the date when property is to pass) the ability to transfer property in the remainder will be of fundamental importance and an inability to do so will amount to a total failure of consideration or a breach which goes to the root of the contract (para 19). However, "that is not this case" (para 19).

  5. If a contract provides for the transfer to the owners of property in any part of the bunkers remaining at the time of payment, "it was to that extent a contract for the sale of goods to which the Act, including the implied condition in section 12, applied" (para 33). (It is not clear how this is reconciled with the Court's immediately following statement that a failure to pass title to any residue remaining at the time of payment would nevertheless only entitle the owners to treat the contract as a whole as discharged if the residue represented such a large proportion of the quantity originally delivered that there could be said to have been a total failure of consideration (para 33)).

  6. The Court of Appeal upheld the Judge's finding that the contract imposed on OWBM an obligation to ensure that the licence which it gave to the owners to use the bunkers was or became binding on whichever entity in the supply chain became the owner of the goods (paras 35-36).

  7. The Court of Appeal stated that the Judge had been wrong to conclude that it was necessary for him to decide whether, on the assumed facts, OWBM had obtained the permission of Rosneft for the owners to consume the bunkers (para 38). Before the arbitrators owners had not advanced the argument that they were not liable to pay because they had not been authorised to consume the bunkers in a manner which bound Rosneft and other suppliers in the chain.

(Energy 7 Shipping LLC and another v O.W. Bunker Malta Ltd and another ("The Res Cogitans") [2015] EWHC 2022 (Comm); [2015] EWCA Civ 105)


Voyage charter – repudiatory breach – damages

The vessel was chartered by Louis Dreyfus for a voyage charter dated 6.1.2011 on an amended Vegoil form.  The voyage was from South America to a port in the Gibraltar-Rotterdam range.  The vessel was delayed by a grounding on her previous employment.  The parties corresponded and charterers’ latest message was accepted by owners as a repudiatory breach which brought the charter to an end.

The arbitrators held that the charterparty was repudiated by the charterers who were liable for damages.  Damages of USD 1,212,316.50 were awarded.

Charterers challenged the amount of damages awarded on the basis that it was not in accordance with the Smith v M’Guire (1858) measure; namely, that the starting point in ascertaining the shipowner’s loss was the amount of freight which the ship would have earned if the charterparty had been performed and that from this amount there should be deducted the expenses which would have been incurred in earning it together with what the ship earned (if anything) during the period which would have been occupied in performing the voyage.  Damages calculated according to this measure would have resulted in an award of USD 478,386.80.

The award of damages made by the arbitrators was based on the difference between (a) the profit which the vessel would have earned if not only the contract voyage but also the next two voyages had been performed and (b) the profit actually earned on the substitute charter to Europe.  (The performance of the contract voyage followed by the next two voyages would have brought the vessel back to Europe at about the same time as the completion of discharge under the substitute fixture.)

Held (Males J):

  1. There was no error of law in the arbitrators’ reasoning.  Charterers' appeal was dismissed.

  2. The fundamental principle in assessing damages for breach of contract is the compensatory principle: putting the innocent party in the same position as if the contract had been performed.  Although the Smith v M’Guire principle is the starting point for the calculation of damages for loss of profit, it is only a prima facie measure and it may be necessary to depart from it.  It compensates the owner for loss of the freight but does not address any loss which may be suffered if the vessel is less advantageously positioned as a result of the charterer's repudiation.

  3. Performance of the contract voyage would not only have enabled owners to earn the freight payable under the voyage charter but would have positioned the vessel in Europe where higher freight rates were available.  The repudiation there lost owners the charter freight.  They had to settle for the lower freight under the substitute charter.  They also lost the benefit of two transatlantic voyages which could have been performed in the same time as the substitute fixture.  This is a different loss from loss of profit and was appropriately awarded by the arbitrators, together with sums for loss of profit.

(Louis Dreyfus Commodities Suisse SA v MT Maritime Management BV (The “MTM Hong Kong”) [2015] EWHC 2505 (Comm))


Lien – proceeds of sale

Cargo was carried on the MONARCH from Mexico to China. Silver Rock (the purchaser of the cargo from Grupo Minero) entered into a voyage charterparty with Castleton for carriage of the goods. Castleton entered into a time charter with Clipper Bunker. Clipper had a long term charterparty with the vessel's owner (the carrier).

Silver Rock failed to pay freight, deadfreight, demurrage and other charges. Castleton therefore exercised a lien and eventually got an order to sell the cargo. The proceeds were held by Castleton's solicitors to the order of the court. It was unclear whether the proceeds belonged to Silver Rock or the consignee, Grupo Minero.

Castleton obtained an arbitration award in its favour against Silver Rock for the sums owing to it. The shipowners assigned to Castleton their rights under the bill of lading, and Castleton obtained an arbitration award against Grupo Minero for almost an identical sum to that in the first award. Castleton then sought payment out of the sale proceeds to satisfy those two awards.

Held: (Judge Waksman QC)

  1. It did not matter that it was not clear whether Silver Rock or Grupo Minero was the owner of the cargo and therefore of the sale proceeds. Castleton was judgment creditor of both of them and the application for payment out was made against both of them. The court has ample jurisdiction to enable proceeds of sale to be paid out to the judgment creditor and it was not suggested that any other party had a better claim to the monies.

  2. Castleton was the beneficiary of a lien conferred by the voyage charterparty, although as a time charterer it could not take possession of the cargo. However it did have the similar right to direct the vessel not to unload the cargo.

  3. Castleton was also the beneficiary by assignment of a true lien under the bill of lading in favour of the carrier and against the shipper Grupo Minero. The rights of lien which pre-existed the sale were transformed into a right in the proceeds of sale.

(Castleton Commodities Shipping Company Pte Limited v Silver Rock Investments [2015] EWHC 2584 (Comm))


Voyage charter – responsibility for loading and discharge

Cargo of rice carried on the "SEA MIROR" from Karachi, Pakistan to Abidjan, Ivory Coast.  Continental was the carrier under the bills of lading. The bills of lading contained/evidenced contracts of carriage incorporating the Hague Rules and terms of the Synacomex 90 form.

Cargo claims arose alleging moisture damage and short delivery. The issue was whether any loss/damage arising from shortcomings in the loading or discharge was the responsibility of the shippers/charterers/receivers rather than owners, pursuant to clause 5 of the charterparty (as incorporated into the bills of lading):

"Cargo shall be loaded, trimmed and/or stowed at the expenses and risk of Shippers/Charterers … Cargo shall be discharged at the expenses and risk of Receivers/Charterers … Stowage shall be under Master's direction and responsibility." 

Held (Flaux J): 

  1. Responsibility for loading and discharge was normally that of the owner, therefore clear and unambiguous words were necessary to transfer responsibility to the charterer.

  2. The charterparty did not impose an express obligation to perform the cargo operations on the charterers.

  3. The case law indicates that risk was equated with responsibility in this context.  Therefore, construing the contracts as a whole, the words "at the expenses and risk of Shippers/Charterers" were sufficiently clear to transfer responsibility for loading and discharge and any shortcomings in those operations to the charterers and cargo interests.

(Societe de Distribution de Toutes Merchandises en Cote d'Ivoire trading as "SDTM-CI" and others v Continental Lines NV and another [2015] EWHC 1747 (Comm))


Insurance – non disclosure – valuation

The claimant owned a yacht "GALATEA" which caught fire and became a constructive total loss. The defendant insurers had agreed to insure the vessel for an agreed value of €13 million. The claimant sought to recover that sum from the defendant insurers, and also claimed against their brokers. The defendants agreed that the loss was of a type covered by the policy but denied liability on various grounds, the principal one being that the vessel was overvalued.

Although insured for €13million, the market value was (and the claimant believed it to be) no greater than €7-8million. At the time the insurance was put in place, the vessel was on the market for €8million and the vessel manager had advised the claimant that they should be happy with €7million. The defendants were not aware of these facts, and argued that they were material and should have been disclosed. As a result of the non-disclosure, the defendants were induced to enter into the contract on different terms and therefore the contract could validly be avoided.

H​eld (Burton J):

  1. The claim against the insurers failed but the claim against the brokers succeeded.

  2. In the London market, the value of a yacht agreed for insurance purposes was generally intended to reflect the market value. This was to ensure that the assured was put in the same position after the loss as before and did not receive a windfall.

  3. If the assured had obtained a valuation of the market value of the vessel which was significantly lower than the insured value, a prudent underwriter would regard such valuation as material information. It was also material that the claimant had been advised by its professional yacht manager that the vessel was only worth around €7million and that the vessel was on the market for €8million.

  4. It was clear from the evidence that the underwriter would not have insured the vessel at €13million if the material circumstances had been explained to him. They would likely have agreed to insure it for €8million. The defendants had therefore proved that they were induced to enter into the contract of insurance on the terms agreed by the non-disclosure.

  5. The proposal form contained a misrepresentation that the vessel manager believed the market value of the vessel to be €13million. Although this misrepresentation was material, it did not induce the defendants to enter into the policy. On the evidence, they would have probably entered into the policy even in the absence of such a representation.

  6. In any event the claimant had failed to give valid notice of abandonment and failed to comply with a clause which provided for provision of a sworn proof of loss within 90 days of the casualty. The claimant would therefore have been unable to recover any sums under Section A of the policy (about 75% of the loss).

  7. The brokers AIS were in breach of their duty of care both in contract and tort and as a result, the proposal form did not contain the correct details as to the market value of the vessel. This breach of duty caused the claimant to enter into a voidable contract to insure the vessel for €13million instead of a valid contract to insure it for €8million. The claimant was entitled to recover damages for a sum equivalent to the claim under Section B of the policy (about 25% of the loss).

(Involnert Management Inc v Aprilgrange Limited and others [2015] EWHC 2225 (Comm))


Charterparty – extension of time – arbitration

The charterer of the "AFRICA REEFER" brought a claim against owners for damage to a consignment of pears.  The claim was brought against owners in the Belgian courts. Owners challenged the jurisdiction of the Belgian court on the basis that the matter should be subject to arbitration. The Belgian court decided that the claim should have been subject to arbitration.  The claimant charterer therefore applied to the court for an extension of the one year Hague/Hague Visby limitation period of 3 years and 8 months.

Held (Burton J):

  1. The issue (pursuant to section 12 of the Arbitration Act 1996) was whether there was conduct by the defendant owners which made it unjust to hold the other party to the strict terms of the time limit.

  2. In Belgian proceedings it was not necessary for the defendants to take the jurisdiction/arbitration point any earlier than they did.  Nor had they taken any other action which was inconsistent with their position of not committing to the jurisdiction.

  3. The claimant had held a firm view through much of the proceedings that the claim was subject to Belgian Court jurisdiction (although this view turned out to be wrong).  It had taken a deliberate decision to pursue the Belgian proceedings, confident of their success on this point and without considering the possibility that the defendants would succeed on the arbitration point.

  4. There was no conduct by the defendants which made it unjust to hold the claimant to the time limit and therefore the claimant's application was dismissed.

(Expofrut SA and others v (1) Melville Services Inc (2) Lavinia Corp [2015] EWHC 1950 (Comm))


Time charter – concluded contract – arbitration clause

Hellenic chartered the vessel "NAVIGAS" from the owners, Premier.  Premier alleged that the agreement was a long term charterparty (2.5 years) which Hellenic had breached by redelivering the vessel early.  Hellenic argued that it was a hybrid arrangement on an interim basis.  It was not a time charter because it was of no defined duration.

Premier initiated arbitration against Hellenic alleging repudiatory breach of the charterparty.  Hellenic reserved its position as to jurisdiction before the arbitrator.  The arbitrator found that he did have jurisdiction to determine Premier's claim, determined the dispute on the merits and awarded Premier approx. US$700,000.

Hellenic challenged the award on the basis that it did not agree the terms of the time charter, including the London arbitration clause and so the arbitrator lacked substantive jurisdiction.

Held (Flaux J):

  1. As the matter was a challenge under section 67 Arbitration Act 1996, it involved a complete rehearing of the matter.  The court heard the evidence afresh and reached its own decision, not bound in any way by the arbitrator's decision.

  2. On the evidence put forward, there was no agreement in principle or on commercial terms between the parties on the key dates.  There was no binding long term charter and no arbitration clause, therefore the arbitrator had no jurisdiction.

  3. It was impossible for Premier to establish implied acceptance of the draft charterparty terms which they sent over because Hellenic's conduct was inconsistent with such acceptance.

  4. The arbitrator's award was therefore set aside and of no effect because he did not have substantive jurisdiction.

(Hellenic Petroleum Cyprus Ltd v Premier Maritime Ltd [2015] EWHC 1894 (Comm))


Admiralty – collision – extension of time

The NIYAZI S collided with the STOLT KESTRAL near the port of Liverpool on 10 October 2010. Claimant owners of the STOLT KESTRAL issued an in rem claim form on 9 October 2012, just prior to expiry of the 2 year time limit.

The NIYAZI S remained out of the jurisdiction and so on 10 December 2013 the claimant applied to add four sister ship defendants to the in rem proceedings. On 11 December 2013 they also issued an in personam claim form.

Hamblen J held that there had been no reasonable opportunity since the collision to arrest the NIYAZI S so the claimant was entitled to an extension of time for service of the in rem claim form.  The in personam proceedings were not the same as the in rem proceedings and so issuing the in rem proceedings had not stopped time running for the in personam claim.  The in personam claim was therefore not brought in time and it was not possible to grant a mandatory extension of time because section 190(6) of the Merchant Shipping Act 1995 only applied to in rem claims. Hamblen J also held that the claimant was not entitled to a discretionary extension. The fact that the claimant's solicitors believed (wrongly) that the claim form issued within the two year limit was a hybrid claim form (including the in rem and in personam claim) was not a good reason for failing to issue the in personam claim form in time.  Finally, a mandatory extension of time was granted for joinder of the sister ships because there had been no opportunity to arrest either the wrongdoing ship or the sister ships.

The claimant appealed.

Held (Sir Brian Leveson, Tomlinson LJ, Clarke LJ):

  1. The judge was not wrong to regard section 190(6) as applicable only to in rem proceedings.  The words of the statute were clear.  The rationale behind the granting of the mandatory extension was the lack of a reasonable opportunity to arrest the defendant ship.  The wording was not applicable to in personam claims.

  2. The judge did not hold that the in personam claim was time barred, rather that it was brought after the expiry of the period two years from the accrual of the cause of action.  Under section 190(3) of the MSA 1995, this meant that the remedy was barred but the claim still existed.  It was therefore not possible to apply by analogy the decision in The NORDGLIMT (1988) because that dealt with a time bar which extinguished the claim, not just the remedy.  The issue here was simply whether the in personam proceedings had been brought within the relevant period.  They were not.  It was irrelevant that other proceedings had been within that period.

  3. The judge was right to apply the two stage test in the AL TABITH (1995) in relation to the discretionary extension of time.  The errors made in relation to issue and service of the in personam claim form were particularly egregious and there was no good reason to excuse the failure to serve in time.

  4. The argument for alternative service of the claim form out of the jurisdiction was astonishing as it ignored the provisions of CPR PD 61 paragraph 3.6(7) which required that alternative methods of service can only be ordered where the vessel was within the jurisdiction.

(Stolt Kestral BV v Sener Petrol Denizcilik Ticaret AS [2015] EWCA Civ 1035)


Repudiation of wheat sale contract – measure of damages

The appellant seller under a contract for the purchase of Russian milling wheat appealed against a decision upholding the measure of damages awarded to the respondent buyer following the seller's anticipatory repudiatory breach of the contract.

The shipment period under the contract was 23-30 August 2010. The contract incorporated GAFTA 49, the standard FOB sale contract for delivery from Central and Eastern Europe in bulk or bags.

On 5 August Russia announced a prohibition on the export of agricultural products from 15 August until the end of the year. The seller purported to cancel the contract on 9 August under the GAFTA prohibition clause.

The buyer treated that as repudiation on 11 August and claimed damages representing the difference between the contract price and the market price on that date, as the GAFTA default clause provided.

The GAFTA Board of Appeal (later upheld by the High Court and Court of Appeal), held that the seller was not entitled to cancel because the prohibition might have been lifted, although the contract would have been cancelled in any event because the prohibition was not, in the event, lifted. Awarding damages, the Board doubted whether, at common law, events occurring after the breach, namely the eventual imposition of the prohibition, which showed that the same loss would have been suffered even without the repudiation, were relevant to the assessment of damages under a contract for a single cargo, rather than a contract for delivery by instalments. In any event, it concluded that the default clause excluded the common law compensatory principle.


(1) Two questions arose in relation to the common law compensatory principle:

(a) assuming there was an available market, as at what date the market price was to be determined for the purpose of assessing damages;

(b) the circumstances in which it would be relevant to take account of contingencies, other than changes in market price, if subsequent events showed that they would have reduced the value of performance even without the defaulter's renunciation.

(a) At first sight, the answer to the first question was that where there was an available market, the market price was determined as at the contractual date of delivery, unless the buyer should have mitigated by entering into a substitute contract earlier.

Normally, the injured party would be required to mitigate by entering into a substitute contract as soon as reasonable after the contract was terminated and damages would be assessed by reference to the price obtained.

If he did not mitigate, damages would generally be assessed by reference to the market price at the time when he should have done.

(b) Regarding the second question, The Golden Victory had held that the overriding principle was the compensatory principle. Irrespective of the date as at which the market price was ascertained, it was necessary to take account of contingencies known at the date of the arbitrator's assessment to have occurred, if their effect was that the contract would have been lawfully terminated at or before its term. The principle in the Golden Victory applied equally to a contract for a one-off sale and a contract for the supply of goods over a period of time.

(2) Damages clauses were commonly intended to avoid disputes about damages, either by prescribing a fixed measure of loss or by providing a mechanical formula in place of the fact-sensitive common law approach. There could be no presumption that the parties intended the clause to produce the same measure of damages as would arise at common law.

However, a damages clause could be assumed not to have been intended to operate arbitrarily, for example by producing a result unrelated to anything approximate to the true loss. Such clauses were not necessarily to be regarded as complete codes for the assessment of damages. Whether they were intended to deal with damages exhaustively, excluding all considerations not expressly addressed, was a matter of construction.

The GAFTA default clause considered how much loss had been suffered. The clause did not deal with the effect of subsequent events which would have resulted in the contract not being performed in any event. The effect of such events could be excluded from consideration only if the clause were treated as a complete code not only for determining the market price but for every aspect of the assessment of damages. The clause could not be viewed in that way. Its terms neither addressed nor excluded the consideration of supervening events which operated to reduce or extinguish the loss. Applying the common law, the award was varied to replace the buyer's substantial damages with nominal damages.

(Bunge SA v Nidera BV [2015] UKSC 43)



  • Related Services
  • Related Sectors
  • Related Locations