The problem of foreign judicial determinations

A charterparty case today, Shagang Shipping Co Ltd v HNA Group Co Ltd [2016] EWHC 1103 (Comm) looked like a simple case of owners claiming charter hire and damages from time charterers (or rather their parent company guarantors). Unfortunately it turned into something like a nightmare for the owners’ lawyers.

The difficulty was that, while the figures were fairly straightforward, the charterers’ group (HNA) sought to escape scot-free by alleging that the charterers had only signed the charter because the owners had bribed one of the charterers’ employees to approve it. HNA was a leading and influential company in Hainan Province in China. It duly produced confessions of, and convictions in Hainan for, the relevant bribery by an officer of the owners and their own employee. Unfortunately there were distinct indications that these confessions had been obtained by some interesting police practices not unconnected with rubber truncheons, cigarette burns and  near-drowning, which were testified to in the case and which Knowles J specifically stated could not be ruled out. Happily Knowles J was able to rule against HNA  on the basis of external evidence that there had been no bribery.

A correct result, therefore. But the difficulties cases like this raise are of a high order. External evidence will not always be present; and where it is not the difficulties of obtaining evidence of malpractice of the kind alleged in Shagang are obvious. The only cure would seem to be a term in the relevant contract excluding a priori the use of at least some court decisions as evidence in subsequent proceedings arising out of a dispute. But that cure might well be worse than the disease.

Disponent owners’ liens on cargo

Can disponent owners lien cargo for sums due under their sub-charter? Dicta in The Clipper Monarch [2015] EWHC 2584 (Comm); [2016] 1 Lloyds’ Law Rep 1, suggests that they can. The sub-charterers, Silver Rock, had failed to pay freight, deadfreight, and demurrage to disponent owners, CCS, and the vessel waited outside Chinese territorial waters. CCS obtained and order to sell the cargo under CPR Part 25.1(1)(c)(v), which provided for the gross proceeds of sale to be held by the claimant’s solicitors to the order of the court and “treated as if subject to the same rights (if any) as [CCS] had in respect of the goods prior to their sale”.

The cargo had been purchased by Silver Rock from Max Coal and sold on to Grupo Minero, the original consignee. Silver Rock found a new purchaser and the vessel berthed to discharge the cargo. The cargo was sold and its proceeds held by CCS’s solicitors pursuant to the High Court’s order. CCS obtained arbitration awards against Silver Rock for sums due under the voyage charter, and against Grupo Minero, claiming as assignee of the head owner’s right to claim an almost identical amount as carrier under the bill of lading. The awards were converted into judgements. His Honour Judge Waksman QC held that the sale proceeds representing the cargo clearly belonged to one of the two judgment debtors and CCS was entitled to the monies as judgment creditor against whichever of them was the appropriate owner.

His Honour Judge Waksman QC then considered, obiter, a second ground on which CCS would be entitled to the proceeds of the sale – by way of its rights on a lien on the cargo which arose prior to the sale. If the cargo was owned prior to sale by Grupo Minero, CCS relied on the voyage charter “lien” clause as incorporated into the bills of lading, CCS having taken an assignment of the carrier’s rights. If the cargo was owned by Silver Rock, CCS relied on the voyage charter “lien” clause as giving it a right with similar effect to a possessory lien, namely a right to procure that the cargo be withheld from Silver Rock by directing the employment of the vessel in its capacity as time charterer.

This second ground assumes that the time charterer has the right, under the employment clause, to direct the shipowner to lien the cargo by not unloading it. Such an order would only be lawful if the shipowner had the right to lien the cargo under the bill of lading, as was the case in The Clipper Monarch. It is worth noting that a similar argument was rejected  in The Mathew [1990] 2 Lloyd’s Law. Rep 323 where Steyn J held that there was no implied term that the time charterers could direct the shipowners to lien cargo.

No loss, no damages: latest from the CA

Christmas reading from the English CA for charterparty buffs and damages enthusiasts. In The New Flamenco [2015] EWCA Civ 1299 , decided a couple of days ago, a cruise ship under time-charter at a highish rate was wrongfully redelivered a couple of years early. That’s OK, said the owners: we’ll just have those two years’ lost profits, please (there being no relevant market). Not so fast, say the charterers. You sold the ship on redelivery for a very tidy sum: had we given her back at the proper time the market would have collapsed and you’d have got many millions of dollars less for her — a figure that dwarfs any profits lost. In fact you should be d****d grateful to us for breaking our contract, since you’re actually a great deal better off than if we’d kept it.

Arbitrators hold for the charterers; Teare J on appeal for the owners. In a rare reversal of Teare J, the CA restore the arbitrators’ decision. Whatever the case where there is a market rate, in non-market cases where the claimant claims on the basis of profits lost, the general British Westinghouse rule applies and any gains resulting are in account. A salutary reminder from Longmore LJ at [29]: “compensation for actual loss is the underlying principle and … in this connection, it is the available market rule that is a gloss on that underlying principle.” Verb sap.

Happy Christmas to all.

AT

Free in/ Free out clauses and cargo claims

SDTM-CI v Continental Lines N.V. [2015] EWHC 1747 (Comm)

Cargo claims were brought against the shipowner under two bills of lading incorporating the terms of a charterparty which contained a clause providing “Cargo shall be loaded, spout trimmed and/or stowed at the expenses and risk of Shippers/Charterers … Cargo shall be discharged at the expenses and risk of Receivers/Charterers at the average rate of 1,500 metric tons per weather working day ……Stowage shall be under Master’s direction and responsibility…” Flaux J has held that the incorporated provision has the effect of transferring responsibility for loading and discharging away from the shipowner. To the extent that it was established that the cargo was damaged by bad loading and/or discharge, as opposed to bad stowage, the cargo interests could not recover such damages from the shipowner.

Simon Baughen