Article: Liens over freight and demurrage

The Owners of the vessel "SPYROS C" time chartered the vessel to M who voyage chartered the vessel to T, who were also the Shippers of the cargo. When the Voyage Charter was concluded, the Time Charterers agreed with the Voyage Charterers that the Voyage Charterers would pay loadport disbursements directly to the agents, and that this amount would be deducted from freight otherwise due. When the vessel was at the loadport the Time Charterers also requested the Voyage Charterers to pay US$10,000 cash to the Master, likewise to be deducted from freight. After taking account of these deductions (and commission and insurance) less than US$6,000 was payable by way of net freight. This amount was remitted by the Voyage Charterers before the vessel completed loading.

Freight was due three days after signing and releasing Bills of Lading. On completion of loading the Owners, with Time Charterers in arrears of payment of hire, issued notices of lien to intercept subfreights payable under the Bills of Lading, which incorporated the terms of the Voyage Charterparty. The Owners sought direct payment of freight to them pursuant to the lien. The Owners argued that the Voyage Charterers had not paid Bill of Lading freight, they had only made advances against freight and accordingly the Owners were entitled to lien the full amount of freight due less only the allowed contractual deductions for commissions.

Mr Justice Colman held that the arrangements between the Time Charterers and Voyage Charterers did not affect the Bill of Lading obligation whereby freight was payable by the Shippers. The Shippers/Voyage Charterers were liable to pay freight to the Head Owners following the exercise of the lien and the arrangement with the Time Charterers did not vary that. The Judge warned parties against entering into ad hoc arrangements for the payment of freight other than in accordance with the written terms of the Bill of Lading and the Voyage Charterparty where this was incorporated into the Bills of Lading. The result would have been different had the Voyage Charterers obtained the agreement of the Head Owners that cash advances would be treated as payment of freight. Such agreement should always be sought in these circumstances.

A second dispute arose concerning demurrage at the discharge port. As the Head Owners were owed hire by the Disponent Owners, they sought to lien discharge port demurrage from the Shippers on the grounds that by then the Bill of Lading incorporated the terms of the Voyage Charter by which demurrage was payable or, alternatively, that there was an implied obligation under the Bill of Lading contract to discharge within a reasonable time.

The Judge held that general words incorporating the terms of a Voyage Charter into the Bill of Lading did not incorporate provisions relating to laytime and demurrage and thus the Shippers were not directly liable for demurrage at the rate specified in the Charterparty but the Shippers were under an implied obligation under the Bill of Lading to discharge their cargo within a reasonable time. This would be calculated by reference to the whole of the cargo shipped under each Bill of Lading in the context of the whole discharging operation. The Court found that the rate of discharge specified in the demurrage clause of the Charterparty might be indicative of the reasonable rate.

Staff Author