Repudiated voyage charters and recoverable damages.

The prima facie measure of damages for repudiation of a voyage charter by charterers is the profit which would have been made by the shipowner on performance of that charter, less any benefit arising from mitigation which needs to be taken into account, such as what the ship earned during the period which would have been occupied in performing the voyage (Smith v M’Guire (1858) 3 H & N 554). However, the shipowner may suffer loss other than loss of profit and this may also be recovered, subject to the rules on remoteness. An example of such a different kind of loss arises when a vessel is redelivered to an owner in the wrong location or when a substitute fixture is completed at a discharge port which is not (or which is some distance from) the discharge port under the contract voyage.

This was the case in The MTM Hong Kong [2016] 1 Lloyd’s Rep 197. After the repudiation the vessel had proceeded on her ballast voyage to South America where she had been due to load under the terminated charter. On arrival there was an unexpected delay of nearly three weeks in fixing a substitute charter. The substitute fixture completed in Rotterdam on 12 April 2011. Had the original charter had been performed, the voyage would have completed on 17 March 2011 and the vessel would then have carried a cargo from the Baltic to the US, followed by a further cargo from the US to Europe. The owners were awarded the profit which the vessel would have earned on the contract voyage and the next two voyages less the profit actually earned on the substitute charter. Males J held that the arbitrators had been correct in awarding this additional head of loss.

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.