Article: Clarity on Owner’s right to collect bill of lading freight

Alpha Marine Corp v Minmetals Logistics Zhejiang Co. Ltd, MV ‘SMART’ [2021] EWHC 1157 (Comm)

The English High Court has clarified that the contractual carrier under a bill of lading is entitled to collect the freight due under the bill of lading even when it provides that freight is payable to a charterer 'as per the charterparty'. An owner’s access to the bill of lading freight can be a useful tool when faced with a defaulting time charterer. 

Facts
Minmetals chartered the MV Smart from owners, Alpha Marine Corp for a time charter trip from Richards Bay, South Africa on an amended NYPE form. Minmetals then voyage chartered the vessel to General Nice Resources (Hong Kong) Ltd. 

Shortly after departing Richards Bay, the vessel ran aground. Owners contended that charterers were in breach of the safe port warranty and directed sub-charterers to pay the bill of lading freight directly to owners. The freight was eventually paid into escrow. 

In the first instance, the tribunal held that the grounding was caused by the Master’s negligence so the unsafe port claim failed. Owners were therefore in breach of the charter as they had wrongly intervened in the contractual relationship with the sub-charterer. Importantly, the tribunal held that 'Ordinarily under the terms of the New York Produce and similar forms of charter, there is an implied obligation on the owners to allow the charterers to collect the freight. That obligation is an implicit corollary of the obligation in clause 8 to allow the charterers to direct the ship’s employment'. Consequently they held that owners were in breach of this term. 

The Appeal
The decision of the tribunal was reversed by the High Court who confirmed that where the bill provides for freight to be paid as per the charterparty to the charterer, owners can override that direction and require direct payment of the total amount of freight outstanding to it. Crucially, the charterer does not have to be in default before serving notice to the shippers and the judge confirmed that no such term could be implied; it must be expressly set out in the charterparty. 

Conclusion 
Members will welcome the clarity brought by this decision over the ability to lien bill of lading freight (which remains outstanding) and is another avenue of recourse in the face of a defaulting charterer. Once the notice of lien has been served on the relevant party, owners will also have a separate right of action against that party should the freight not be paid as directed. 

Nevertheless, members should always exercise caution when exercising liens on cargo, sub-hire and freight and should seek guidance from the club to ensure the lien has been exercised properly. 
 

Category: Bills of Lading