135. Overseas Transportation Company v Mineralimportexport (the “Sinoe”) [1971] 1 Lloyd’s Rep 514; [1972] 1 Lloyd’s Rep 201

Cesser clause – charterers not released if owners’ lien not legally and practically enforceable

The facts

Cement in bags was shipped from Constantza in Romania to Chittagong in Pakistan on an amended Gencon form. A bill of lading was issued on the Congenbill form which incorporated the terms of the charterparty.

Clause 27 (the cesser clause) read as follows:

“Charterers’ liability shall cease as soon as the cargo is on board Owners having an absolute lien on the cargo for freight, deadfreight, demurrage and average.”

Clause 23 read as follows:

“Stevedores to be employed by Charterers in loading and by Shippers in discharging who shall be considered as Owners’ servants and subject to the orders and direction of the master.”

On discharge, the cargo was damaged due to the negligence of the stevedores and who were found by the arbitrator to have been incompetent and ill equipped. Discharge was delayed for the same reason.

The cement was imported for use by the Government of Pakistan which would not countenance a lien.

The main defences raised by the charterers against a claim by the owners for demurrage were that:

1. they were protected by the cesser clause; and
2. the damage was caused by the owners’ servants.

The arbitrator, Mr R A H Clyde found for the owners but stated a special case for the Commercial Court.

Findings

The Commercial Court (Donaldson J) found that the cesser clause only protected the charterers if the owners were able to effectively exercise their lien which they were not.

During the course of the arbitration the parties agreed that the word “shippers” should read “charterers” in clause 23.

The court held that even if the stevedores were to be regarded as the servants of the owners as per clause 23, the charterers incurred liability for appointing incompetent charterers which was ultimately the cause of the damage.

The Court of Appeal (Denning MR, Megaw and Stephenson LJJ) agreed with the Commercial Court.

Commentary

Donaldson J’s conclusion may be regarded as an incremental development of the law because the then existing authorities were concerned primarily with the question of the extent of the lien and not its effectiveness.

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