Court of Appeal, Singapore

Yong Pung How CJ, Chao Hick Tin JA And Belinda Ang J

21 May 2003; 25 August 2003

KEYWORDS

Charterparty –  Bill of Lading – Incorporation of Charterparty terms into Bill of Lading – Delivery against Bill of Lading – Lien – Liability of Cargo to satisfy Lien

FACTS AND DECISION

A cargo of crude oil was carried under a charterparty and bill of lading. The charterparty had a lien clause that said “[t]he Owner shall have an absolute lien on the cargo for all freight, deadfreight, demurrage …”. It also had a demurrage clause stating “[c]harterer shall pay demurrage per running hour …”. The bill of lading incorporated the charterparty in these words: “freight payable as per charter party … all terms and conditions, liberties and exceptions of the charter party are herewith incorporated”.

At the discharge point, the owner of the cargo was not able to produce the original bill of lading and the shipowner refused to deliver the cargo. The shipowner obtained an order for sale of the cargo and the cargo was sold by the Sheriff. There was a delay of 130 days before discharge and the shipowner claimed demurrage for this and sought to recover the same from the proceeds of the sale. The owner of the cargo, who was not holding the bill, objected to this and claimed that the shipowner was liable for conversion in selling off the cargo.

The High Court allowed the shipowner’s claim for demurrage and dismissed the cargo owner’s conversion claim. In the High Court, the owner of the cargo conceded that if the shipowner could exercise a lien, then the same can be satisfied on the proceeds of the sale, but argued that the shipowner was not entitled to demurrage and was not entitled to exercise the lien. The High Court held that the shipowner was entitled to demurrage and to exercise the lien, hence allowed the demurrage claim and recovery of the same from the proceeds of sale. On appeal, the owner of the cargo attempted to introduce a new argument namely under the charterparty the liability to pay demurrage was only on the charterer and hence same cannot be claimed against the proceeds of sale of the cargo belonging to the owner of the cargo. The Court of Appeal refused to allow this argument to be introduced and upheld the decision of the High Court.

OBSERVATION

Even if the new argument was allowed to be introduced, the decision might not have been different, as this was not a regular case where the litigation was between the shipowner and the bill of lading holder, where the bill of lading holder would try to push the liability onto the charterer. In this case, irrespective of whether it was the charterer or the bill of lading holder (who did not come into picture) was liable, the shipowner would have had a lien on the cargo when demurrage was not paid.

Although a contractual lien may be limited between the contracting parties, in the sense that it may not be good if a non-owner gave the lien and subsequently the true owner makes a claim for the cargo (Welsh Development Agency (Holdings) Ltd v Modern Injection Mouldings Ltd [1986] Lexis Citation 1535), that will not assist the subsequent purchaser as the one in the Singapore case. This is because the contractual lien was rightly given by the lawful owner at the time and the subsequent purchaser purchased with knowledge of the document (charterparty) creating the lien.

When the shipowner rightly exercises the lien, any right of the owner to the proceeds of the sale will be for the proceeds less the sum of the demurrage payable to the shipowner. This is so as long as the lien clause was incorporated into the bill of lading and was effective between the parties to the bill of lading. This will more likely be so in a lien clause as it will be stated in neutral terms binding the cargo rather than any party.

Overview by ARUN KASI