136. Fidelitas Shipping Company, Ltd v V/O Exportchleb [1963] 1 Lloyd’s Rep 246; [1963] 2 Lloyd’s Rep 113

Cesser clause – charterers held entitled to benefit of clause on facts

The facts

Grain was shipped from the Black Sea port of Zhdanov.

The destination was altered from Basrah on the Persian Gulf to England with one charterparty replacing another. In the second charter, the parties agreed that laytime would commence on a date preceding the date of the charter.

The provision regarding the commencement of laytime was contained in a collateral oral agreement which was formalised in a written addendum, dated approximately one week after the date of the second, replacement charter.

The cesser clause read as follows:

“The charterers’ liability on this charter to cease when the cargo is shipped (provided the same is worth the freight, dead-freight and demurrage, on arrival at port of discharge), the owner or his agent have a lien on the cargo for freight, dead-freight, demurrage, lighterage at port of discharge and average.”

Bills of lading were issued which incorporated the terms of the “charterparty”. The incorporation clause in the bills of lading did not refer specifically to the addendum.

A dispute arose between the parties concerning the delay at the loading port of Zhdanov with the owners claiming demurrage and the charterers claiming despatch money.

Two arbitrators were appointed, RAH Clyde and V Kutuzov. They were unable to agree and John Chesterman was appointed as umpire.

The umpire decided both that the owners were entitled to demurrage and that the cesser clause did not protect the charterers.

The reason given for the second finding was that the bills of lading did not incorporate the addendum allowing for extra laytime to originate an obligation on the receivers to pay the demurrage over which the owners could, in turn, exercise a lien to satisfy the requirements of the cesser clause.

Findings

Megaw J in the Commercial Court found that on a proper construction of the bills of lading they did incorporate the addendum and therefore did oblige the receivers to pay demurrage over which the owners could exercise a lien.

The Court of Appeal (Harman, Pearson and Ungoed-Thomas LJJ) agreed with Megaw J.

Commentary

Pearson LJ doubted whether the operation of the cesser clause was dependent on the existence of a lien. This view is inconsistent with the explanation of cesser clauses given the Sinoe.

Pearson LJ’s judgement contains a full compendium of cases on the incorporation of charterparty provisions into bills of lading.

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