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Multiple charters – bills of lading – owners succeeding on various claims against sub-time charterers and voyage charterers. 

 The Facts

The vessel, a newbuilding constructed in Japan, was time chartered on a 1946 NYPE form to disponent owners.

Owners, as agents for disponent owners, chartered the vessel to intermediate charterers also on a 1946 NYPE form (the first sub-charter). 

Intermediate charterers chartered the vessel to sub-charterers on a trip time charter on the same terms as their charter with disponent owners (the second sub-charter).

Sub-time charterers chartered the vessel on a voyage charter on the Gencon form for the carriage of 47 000 mts of steel products from Sevastopol and Odessa, Ukraine to Jakarta, Indonesia and Klang, Malaysia (the third sub-charter). 

The first sub-charter contained the following clause which was pivotal:

“18. That the owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this charter, including general average contributions…”

The vessel was delivered into service and proceeded to load a cargo of steel products at Sevastopol and Odessa.

Bills of lading on the Congenbill 1984 form were signed by sub-time charterers on behalf of the master and were accordingly owners’ bills. 

Prior to discharge in Jakarta, the owners withdrew the vessel from service for failure by intermediate charterers to pay two installments of hire. 

Owners’ managing company notified sub-time charterers and voyage charterers/ shippers of intermediate charterers’ default and demanded that hire due by sub-time charterers to intermediate charterers and freight due by voyage charterers/shippers be paid directly to them.  The notification which was repeated after some time was titled “Notice of Lien”.

Owners offered a new agreement to the sub-time charterers to complete the voyage to Jakarta but this offer was refused. 

Owners carried out their obligations in terms of the bills of lading and proceeded to deliver the cargo in Jakarta after the vessel had been withdrawn from service. 

Proceedings were brought in the Seoul Central District Court under the Debtor Rehabilitation Bankruptcy Law of Korea which led to an order staying debt recovery, including the realization of security, against intermediate charterers.  The Korean proceedings were later recognized as the main foreign proceedings by order of the Chancery Division in accordance with the UNCITRAL Cross-Border Insolvency Regulations, 2006.

Owners made 3 claims in a trial before Andrew Smith J:

  1. For hire due by sub-charterers to intermediate charterers and freight payable by voyage charters/ shippers (referred to as the “lien claims”);
  2. Freight payable by voyage charterers/ shippers in terms of the bills of lading (“bills of lading claims”). 
  3. Remuneration for the period during which the vessel was in service after withdrawal (post-withdrawal claims);          


On the first claim, 4 points were taken:

1 that “sub-freights” in clause 18 did not extend to time charter hire;

2 that the “Notice of Lien” lacked sufficient clarity;

3 that the “Notice of lien” was ineffective to secure future indebtedness;

4 that the Korean proceedings precluded the enforcement of a lien on hire as amounting to the realization of security.

On the first point Andrew Smith J held that although he preferred the reasoning of Lloyd J in the Cebu 1, he was obliged to follow Steyn J in Cebu 2 being the later judgment which had fully considered the earlier judgment.  This meant “sub-freight” in clause 18 did not extend to hire (this finding made a finding on point 4 superfluous).

 The judge held that the 2nd point was without substance.

 On point 3 he found that a lien could extend to hire payable in the future.

 On point 4 he held, in any event, that the Korean proceedings did not operate extra- territorially and that the exercise of a lien had nothing to do with realizing security.

 To decide the bills of lading claims, the Judge relied on an obiter dictum of Rix LJ in the Spiros C to the effect that in owners’ bills of lading, owners are entitled to payment of freight directly from shippers despite the provisions of the voyage charterparty.  In reaching this view (also held by Coleman J at first instance) Rix LJ relied on statements in Wehner v Dene and Molthes Rederi Aktieselskabet that bills of lading are contracts between owners and shippers.     

 He rejected an argument that the owners’ claim for freight was ineffective because it was made under the heading of “Notice of Lien” on the falsa demonstratio doctrine.

 On the post withdrawal claims, the Judge held that a tacit contract had come about with the sub-time charterers who impliedly agreed to a reasonable time charter rate. 

 They were not liable on restitution/enrichment because they did not freely accept the services rendered to them by the shipowners.  This was because the shipowners were obliged to perform in terms of the bills of lading contracts in any event.

 To arrive at his finding that a contract had come about, the judge relied on the analysis of Robert Goff J in the Tropwind

 He held that voyage charterers/shippers would have been liable on enrichment if they had not already incurred liability on the bills of lading. 

 Three points were argued in the Court of Appeal before Tomlinson, Toulson and Pill LJJ: the bill of lading claims, the effectiveness of owners’ notice and the formation of a new contract.

 Andrew Smith J was upheld on all 3 points.


 There is useful reference in the CA judgement to Hobhouse LJ’s observation in  Cho Yang Shipping v Coral (UK) that the insertion of the words “freight pre-paid” in bills of lading do not absolve the shippers from liability for payment if the in fact no freight has been paid.

 It is interesting to note that the analysis of the competing rights and duties in charterparties and bills of lading in  Wehner v Dene (1905) is still good law.


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Charter Party Casebook