Juridical nature of shipowners’ lien
Owners obtained a world-wide freezing order against five sub-charterers.
The first two sub-charters were back-to-back on an amended NYPE form. These charters contained English Law and London arbitration clauses.
The lien clause read as follows:
“That the owner shall have a lien upon all cargoes, and all sub-freights, hire and sub-hire for any amounts due under this charter, including general average contributions”
The terms of the third charter were disputed. Owners contended that the third charter was back-to-back with the first two charters. Charterers contended that the third charter was subject to Greek Law with the arbitration in Athens, with no lien clause. They produced a written document which owners said was a forgery.
Charterers applied to discharge the freezing order on multiple grounds including lack of jurisdiction and the absence of a clear risk of dissipation of assets.
Being a question of law and constituting a necessary finding in order to determine certain of the issues which arose, Christopher Clarke J decided the question of the juridical nature of the shipowners’ lien, definitively and not merely as arguable.
One view is that it is an equitable assignment by the person to whom the debt is owed, as security for an obligation, which that person, in turn, owes to the assignee. The effect of such equitable assignment is that the debtor, once he has notice of the lien, may not make payment to his creditor, if the obligation to the lienor is unpaid; equally the lienor may claim the debt in fulfillment of the creditor’s obligation to him.
Proponents of this view were Lloyd, Nourse, Saville, Steyn and Kerr JJ at first instance and Lord Russell of Killowen (obiter).
In this case, if a shipowner’s lien had the characteristics described above, owners would have a substantive claim against the sub-charterers in question which would give the court jurisdiction to grant the freezing order.
A second view is that the lien is a contractual non-possessory right, peculiar to maritime law, and limited to giving the owners the authority of the charterer to collect the sub-freight. This view was held obiter by Lord Millett in a Privy Council decision.
The Judge considered that the weight of opinion was on the side of the first view. He held that the owners had acquired the charterers’ right against their sub-charterers for sub-hire due at the time when notice was given.
Because the owners, as assignees of the right to hire, took subject to equities, their claims were susceptible to being extinguished by sub-charterers’ right of set-off. Such set-off, to be effective, had to have been claimed before owners gave notice of their lien. Failure by the sub-charterers to claim set-off before notice in this case resulted in the lien taking effect.
Ultimately, however, the Judge discharged the freezing order on the basis that the owners had failed to show a clear risk of dissipation of assets.
The Court referred to the question, but did not decide, whether owners’ claim for damages (as opposed to hire) could fall within the provisions of the lien clause.
The judgment is impressive for its breadth and swift production (10 days).
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