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Case No: A3/1999/1148 QBCMI
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMMERCIAL COURT
(Mr Justice Colman)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 13 July 2000
B e f o r e :
LORD JUSTICE HENRY
LORD JUSTICE BROOKE
and
LORD JUSTICE RIX
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TRADIGRAIN
SA & ORS
|
Appellant
|
|
-
and -
|
|
|
KING
DIAMOND MARINE LIMITED
"The Spiros C"
|
Respondent
|
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Stephen Males QC (instructed by Messrs Richards Butler, London E3 for
the Appellant)
Nigel Meeson (instructed by Messrs Hill Dickinson, Liverpool for the
Respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE RIX:
1. Is a shipper liable under his bill of lading contract with a shipowner to
pay that owner freight "payable as per" a charter when freight under that
charter has already been paid by the time when the shipowner demands payment to
himself?
2. Is a shipowner entitled to demand payment to himself of freight under his
bill of lading when that contract stipulates for payment to another party?
3. Is there an implied term in every bill of lading, in the absence of contrary
provision, that the shipper will discharge the goods and will do so in a
reasonable time?
4. These are the three questions which arise on the present appeal from the
judgment of Mr Justice Colman. They raise some old problems in novel settings.
The parties and their contracts
5. The shipowner, King Diamond Marine Limited, is the owner of the vessel
Spiros C and the defendant in these proceedings (the "owner"). By a time
charter fixture made on 18 February 1998 incorporating the terms of an earlier
time charter dated 18 December 1997 the owner let its vessel to Mercator Marine
for a period of 6 to 8 months commencing on the day of the fixture. I shall
call this fixture the "time charter" and the time charterer "Mercator". The
time charter was on the NYPE form, clause 18 of which grants to the owner the
familiar "lien upon all cargoes, and all sub-freights, for any amounts due
under this Charter". Unfortunately Mercator subsequently became insolvent and
the time charter came to an end with outstanding hire payments due from
Mercator to the owner.
6. In the meantime, on 26 February 1998 Mercator entered into a voyage charter
with Tradigrain Shipping SA, the third claimant, for a voyage from Rumania to
Morocco (the "sub-charter"). This was on the Synacomex 90 form. It contained
clauses concerning the payment of freight (clauses 4 and 46), loading and
discharging, laytime and demurrage (clauses 5, 8, 9 and 49) and a lien on cargo
for freight, deadfreight and demurrage (clause 21). I shall cite the relevant
clauses below. For the present, it may be noted that the freight was expressed
at a rate per tonne "free in/out", that is to say free of expense to the vessel
(clause 5); the freight was payable to a nominated bank and account in the name
of a third party "International Navigation Corp" ("INC") and was payable less
three itemised deductions (viz, "commissions, loading despatch, and
[Mercator's] contribution to extra insurance", clause 46); and the loading and
discharging, laytime and demurrage clauses said that the vessel was to be
loaded at the expense and risk of "Shippers/Charterers" and discharged at the
expense and risk of "Receivers/ Charterers" (clause 5), at the stipulated
laytime rates (that for discharge being contained in clause 49), and the
demurrage was payable "by Charterers" (clause 9, which also stipulated the
demurrage rate of $4,200 per day).
7. The sub-charter contemplated that two parcels of grain would be loaded, a
parcel of 3,800/4,000 tonnes at Constantza and a parcel of 11,000 tonnes at
Nikolaiev.
8. The smaller parcel, which was of wheat, was loaded by 4 March 1998. Its
shipper was Tradigrain SA, the first claimant, presumably an associate company
of the sub-charterer, Tradigrain Shipping. The wheat bill of lading was on the
Congenbill form. It named the shipper, the consignee box stated simply "to
order", but a notify address was given in Casablanca. The port of discharge was
given simply as Maroc. The bill stated in three places on its front that
freight was payable as per charter party. It was common ground (after an
initial dispute at the time of loading, which had to be resolved by an
application to the court) that the charter party referred to in this and the
other bills of lading issued in respect of the larger parcel, which was of
corn, was the sub-charter. The front of the bill referred to Conditions of
Carriage overleaf, and clause 1 of those Conditions of Carriage provided, in
familiar terms, that -
"1. All terms and conditions, liberties and exceptions of the Charter Party,
dated as overleaf, including the Law and Arbitration Clause, are herewith
incorporated."
9. The corn parcel was also loaded in the event at Constantza, and two further
bills of lading were issued, dated 16 March 1998. These bills named consignees
and gave Casablanca as the port of discharge. Save for such details as were
specific to the cargo loaded, these bills were in the same form as the wheat
parcel bill. However, the shipper of the corn parcel was the second claimant,
Finagrain Compagnie Commerciale Agricole et Financiere SA ("Finagrain").
The claims
10. Difficulties were experienced at an early stage. Mercator failed, owing
hire to the owner, who sought to exercise his time charter lien over
sub-freights by notice given to Tradigrain dated 13 March 1998. That was while
the vessel was still at Constantza, loading the corn parcel. There is an issue
as to whether that notice was in time to intercept the payment of freight under
the Tradigrain bill of lading in respect of the wheat parcel. There is no
freight issue concerning Finagrain and the corn parcel.
11. It should be emphasised that the freight claim made by the owner in these
proceedings is against Tradigrain and is to bill of lading freight, and is not
a claim against Tradigrain Shipping to freight under the sub-charter. In theory
the claim could have been put forward in the alternative, against Tradigrain as
a direct claim under the bill of lading, and against Tradigrain Shipping as a
claim to enforce the time charter lien for sub-freights. It is well established
that a lien over sub-freights gives to the shipowner a right, where his
time-charterer has defaulted, to step in and claim payment of such sub-freights
to himself, provided that they have not already been paid: Tagart, Beaton
& Co v. James Fisher & Sons [1903] 1 KB 391, Wehner v. Dene
Steamship Co [1905] 2 KB 92, Molthes Rederi Aktieselskabet v. Ellerman's
Wilson Line Limited [1927] 1 KB 710. The nature of such right is thought to
be an equitable assignment by the time charterer to the shipowner by way of
security: see Care Shipping Corporation v. Latin American Shipping
Corporation (The Cebu) [1983] 1 Lloyd's Rep 302 and the other cases cited
by SCRUTTON on Charterparties, 20th Edition, 1996 at 354, footnote 45.
The shipowner perfects his right of lien by giving notice to the debtor: if the
notice is in time to pre-empt payment of the relevant sub-freight, then the
shipowner is entitled to payment from the debtor, even though he otherwise has
no direct contractual relationship with him. But if the shipowner's notice to
pay comes too late, and the sub-freight has already been paid, then the lien
fails to bite on anything. In the present case, however, whatever may have been
the original terms of the owner's notice to pay, the claim before the court is
not to a lien over the sub-charter freight, but a direct claim under the bill
of lading against the shipper, Tradigrain.
12. The distinction between the nature of the two claims is referred to by Mr
Justice Greer in Molthes Rederi v. Ellerman's at 716/7:
"It is difficult to understand how a shipowner can be said to have a lien on
that which, ex hypothesi, is his own property, and which he is entitled to
because it is his own. A lien is a claim by a person in possession of the
property of another who has the right to keep possession until the owner pays
the debt in respect of which the possessor is entitled to the lien. It seems a
misuse of words to say that a shipowner has a lien on the debt due to him under
the contract made with him by the bill of lading. The lien clause in the
charterparty is needed to give the owner a lien in those cases where the
sub-freight is due to the charterer and not to the owner, as where goods are
carried on a sub-charter without any bill of lading. In such a case the owner
could only become entitled to the sub-freight by virtue of the lien clause, and
it would be too late to exercise this lien after the debt had been paid to and
received by the charterer or through his agent."
13. The forensic reason on the part of the owner for this choice, to claim
directly under the bill of lading rather than by virtue of clause 18 of the
time charter, is because by 13 March 1998, when the owner gave his notice that
freight should be paid to him, the sub-charter freight on Tradigrain's wheat
parcel had already been paid. The owner however submits, and Mr Justice Colman
held below, that it had been paid in such a way as not to amount to payment of
the bill of lading freight, even though the bill of lading freight was
expressed to be "freight payable as per charter party" ie as per the
sub-charter, and despite the general incorporation of the sub-charter into the
bill of lading.
14. The facts regarding such payment were these. Clause 46, the freight payment
clause of the sub-charter provided as follows:
"95% of freight, less commissions, loading despatch, Owners' contribution to
extra insurance, is payable within 3 banking days from signing / releasing
`Clean' Bills of Lading marked `Freight payable as per Charter-Party' or
`Freight Prepaid' in Charterers' option."
The freight on the wheat parcel amounted to $51,401.25, 95% of which was
$48,831.25. On 6 March 1998, when payment of this freight was effected,
Tradigrain Shipping took deductions not only for $ 6,927.56 in respect of the
three matters mentioned in clause 46 (there is an outstanding dispute as to
whether the deduction of $5,000 in respect of Mercator's contribution to extra
insurance was justified) but also for two further items not mentioned in clause
46, namely an advance on account of disbursements at Constantza in the sum of
$25,931.59, and an advance of cash to the master in the sum of $10,000. It had
been agreed between Tradigrain Shipping and Mercator that both of those
advances could be deducted from the freight, and those agreements are recorded
respectively in a telex dated 26 February 1998, the date of the sub-charter
itself, so far as the loading port disbursements are concerned, and in a telex
dated 4 March 1998, so far as the cash to master is concerned. In the result,
a balance of only $5,962.04 was derived, and this was paid on 6 May to the
account nominated under clause 46 in the name of INC. The freight account drawn
up by Tradigrain Shipping on that day clearly showed each item of the
calculation.
15. Thus the claim made by the owner against Tradigrain in these proceedings
was for $48,831.25. That claim arose by way of counterclaim in the case
commenced by the claimants. The owner sought summary judgment of that amount of
freight. Under his judgment below Mr Justice Colman awarded $35,931.59 to the
owner, being the total of the two deductions taken in respect of the
disbursements and the cash to master. He held that to this extent the freight
had not been paid under the bill of lading, since these two deductions were not
expressly allowed under the sub-charter terms incorporated in the bill of
lading. In respect of the balance of the claim, permission to defend was
allowed, on the basis that that part of the freight had been paid prior to the
owner's notice of ´13 March 1998.
16. The other claim argued below, pursuant to the claimants' application under
RSC Order 14A, was with respect to the owner's further counterclaim, this time
against both shippers, Tradigrain and Finagrain, under their respective bills
of lading, for discharge port demurrage. In connection with this claim, the
shippers sought in effect a declaration that they were under no liability under
their bills of lading and that the relative paragraphs of claim in the
counterclaim should therefore be struck out. Mr Justice Colman decided this
issue against the shippers and in favour of the owner, on the ground that, even
though the sub-charter's discharging, laytime and demurrage provisions were not
incorporated into the bills of lading, nevertheless the bills contained an
implied term that the shippers would discharge the vessel and would do so in a
reasonable time.
The judgment below
17. As for the claim to freight, the owner submitted two reasons why it might
be said to have remained outstanding, in whole or part, as at 13 March 1998.
The first was that, because the wheat parcel freight had been paid too early,
the payment only constituted an advance on freight rather than payment of
freight itself. The Judge rejected that submission, holding that there was
nothing in the bill of lading and the sub-charter terms incorporated in it to
prevent early payment. That submission has not been resurrected on this appeal.
18. The second was the submission which succeeded below, namely that there had
been no payment of that part of the bill of lading freight represented by the
two deductions not mentioned in the sub-charter. The Judge reasoned (at [1999]
2 Lloyd's Rep 91 at 96) that -
"Once the bill of lading contract has been entered into and it has incorporated
the freight provisions of the charter, it is not open to the shipper
unilaterally to alter the payment terms of that contract to accommodate
collateral arrangements he may have made with the disponent owner for
deductions from the sub-charter freight."
In this connection he acknowledged that there was no authority of which he was
aware and sought to approach the matter on the basis of principle. However, he
derived support for his conclusion from a rule that a transferee of a bill of
lading is subject only to the obligations which appear in the bill of lading
itself but not to any merely collateral terms (see Leduc v. Ward [1888] 20 QBD 475), and from the extension of that reasoning, in the case of a bill of
lading which incorporates the terms of a charterparty, which HH Judge Diamond
QC formulated in The Heidberg [1994] 1 Lloyd's Rep 287 at 310/311, to
the effect that a transferee of a such a bill should not be affected by oral
terms not contained in either of the two documents.
19. A third issue was raised before Mr Justice Colman by Tradigrain's
submission that no freight was due to the owner in any event, because by reason
of the terms of the incorporated clause 46 of the sub-charter the freight was
payable not to the owner, nor even to Mercator, but to INC. However, the judge
rejected that submission, reasoning that the authorities which permitted the
interception of bill of lading freight by timely notice to the shipper in cases
where that freight was payable to a time charterer in Mercator's position
necessarily also covered the case where such freight was payable to a third
party such as INC.
20. He was therefore prepared to give summary judgment to the owner in the sum
of $35,931.59.
21. As for the demurrage claim, the judge acknowledged the trenchant reasoning
of Lord Diplock in Miramar Maritime Corporation v. Holborn Oil Trading (The
Miramar) [1984] AC 676 (concerning the unlikelihood of sensible businessmen
entering into obligations to pay demurrage over which they have no control) as
militating against the manipulation of the wording of the sub-charter clauses
dealing with discharge, laytime and demurrage so as to impose those obligations
on a shipper, when the clauses refer instead to receiver and/or charterer, and
only refer to shipper in the context of loading. It was conceded by the owner
that the demurrage clause with its reference to demurrage being paid by
"Charterers" (clause 9, referred to in error as clause 8 in the judgment below)
should not be manipulated so as to refer to shippers; and it was held by the
judge that clause 49, with its laytime code for discharging, should not be
incorporated either, inter alia because of its introduction in clause 5, which
referred to cargo being discharged at the risk and expense of
"Receivers/Charterers" as distinct from shippers. Nevertheless, the judge
accepted the owner's alternative submission that the court of appeal decision
in Fowler v. Knoop (1878) 4 QBD 299 was determinative in imposing upon a
shipper an implied term to discharge and to do so within a reasonable time. He
reasoned as follows (at 99/100):
"Nothing in Miramar Maritime Corporation v. Holborn Oil Trading,
sup., can have disturbed this authority which has stood unchallenged for over
120 years and is binding in this Court. The 11th ed. of Scrutton on
Charterparties - the last for which Lord Justice Scrutton was responsible -
states at page 362 that "there is contained in every bill of lading an implied
contract by the consignor to unload the goods in a reasonable time". The text
is to that extent unchanged in the 20th ed. - the most recent (20th ed. page
319) - for which Lord Mustill was jointly responsible.
"The Miramar was concerned not with the question whether the bill of
lading contract included any term which imposed on the consignees an
obligation to take delivery from the shipowners, but whether the consignees
were liable for demurrage as specified in the voyage charter if there was a
failure to take delivery of the whole cargo within the laytime specified in
that charter. There was no consideration of the question whether they were
under any obligation to take delivery of the cargo covered under the bill of
lading contract within a reasonable time.
"The implied term that the shipper should unload the cargo shipped by him
within a reasonable time is, in my judgment, soundly based as a matter of
principle.
"Given that there is a binding contract of carriage between the shipowner and
the shipper on the terms of the bill of lading, and that at the end of the sea
passage, the cargo is to be discharged or at least received overboard by the
shippers or the receivers as indorsees of the bills of lading, the time within
which the shippers or receivers are to procure that this exercise is to be
completed, in the absence of any more specific provision, must in principle be
a reasonable time. The shipper or receiver cannot have an entitlement to keep
the ship waiting for an unlimited time."
He therefore granted a declaration that each of the shippers was under an
obligation to procure discharge of its respective cargo within a reasonable
time and that the discharge obligation was not subject to clause 49.
22. I now turn to consider the submissions made on appeal, beginning with the
issue regarding the use of the advances in respect of disbursements and cash to
master in payment of sub-charter freight.
Can Tradigrain rely on the advances in respect of disbursements and cash to
master for the purpose of effecting freight under the bill of lading?
23. On behalf of Tradigrain Mr Stephen Males QC submitted that Mr Justice
Colman was in error in his conclusion that such advances could not count
towards the freight, even though they were dealt with by Tradigrain Shipping
and Mercator as freight. Such a result would be unreasonable and contrary to
the expectations of the parties. If, as was accepted, there was no surviving
lien over the sub-charter freight, it was equally too late to seek to intercept
the bill of lading freight, for there was no difference between the two. The
principle of Leduc v. Ward did not assist since in any event it was
necessary to look outside the terms of the written documents to discover the
answer to the question whether the sub-charter or bill of lading freight had
been paid. The extension of that principle in The Heidberg to the case
of bills of lading which incorporate charterparties was of dubious validity,
since at the time when such bills of lading are issued it is just as likely as
not that no charterparty document will as yet have been drawn up. In any event,
whatever may have been the position merely by reason of the collateral
agreements to permit deductions against freight for the two advances, once
there had been a settling of accounts on 6 March 1998 and the two advances had
been specifically set off against the liability for freight, there was no
further freight due under the sub-charter, and it followed there could be no
further freight due under the bill of lading.
24. On behalf of the owner Mr Nigel Meeson supported the reasoning of Mr
Justice Colman. He emphasised that although the bill of lading incorporated the
freight (and other) terms of the sub-charter, they were different contracts and
collateral amendments to the latter were not automatically incorporated into
the former. The reference to the sub-charter was a reference to its written
form. It is therefore necessary to clear with the owner as well as the time
charterer any such collateral amendments, even a change of the time charterer's
bank account to which payment is to be directed, if the shipper is to be
protected against the danger that he may be called upon to pay freight to the
owner under the bill of lading even after the sub-charter freight has already
been paid to the time charterer. This may be rigid, but it reflects the
shipping world and the need for formality in the identification of what it is
that is transferred to the transferee of a bill of lading whose rights and
obligations will be affected by such transfer.
25. It is tempting to think that the simple answer to this problem is Mr Males'
fall-back position that, whatever be the effect of the collateral agreements
for the deduction from freight of the two advances, nevertheless once the
set-offs had actually been carried out, as they were on 6 March, the position
is just as though those advances had been repaid to Tradigrain Shipping and
then immediately paid back again specifically in the form of freight. They were
then "specifically designated as freight in respect of the chartered voyage",
to pick up a requirement imposed by Mr Justice Colman for the effective payment
of freight at a time earlier than that contractually required (see at 97).
26. In my judgment, however, this solution does not meet the issue raised by Mr
Meeson's submissions, for, if it be the case that the mode of payment laid down
in the sub-charter cannot be departed from without it being said that bill of
lading freight had not to that extent been paid, then it would be equally open
to complaint that freight paid by means of the set-off of other debts owed by
the sub-charterer to the time charterer was not a payment of freight under the
original terms of the sub-charter incorporated into the bill of lading. This
can perhaps be seen more clearly by realising that the set-off effected on 6
March 1998 had the consequence that some 60% of the freight was not paid into
the designated account but dealt with outside that account by taking a set-off
for advances made for other purposes to other persons on other occasions. Mr
Males' fall-back position therefore is no different from saying that the owner
under the bill of lading is to be regarded as having to give his shipper a
discharge for bill of lading freight in respect of freight paid under the
sub-charter to other than the designated account and (as would at any rate
nominally be the case under clause 46) to other than the designated payee.
27. It seems to me therefore that the basic argument has to be met head-on. Is
a shipowner entitled to say that bill of lading freight "payable as per
charterparty" has not been paid in circumstances where that charterparty's
freight has been paid (as is conceded) albeit in a manner or mode somewhat
different from that specifically laid down in the original terms of that
charterparty?
28. Mr Justice Colman remarked on the fact that he knew of no authority on this
point and therefore had to approach the problem on the basis of principle. No
new authority has emerged at this appeal hearing, and so my approach must be
the same. Looking at the problem as a matter of principle, I would have thought
that the solution ought to be found by resolving, if that is possible, the
competing demands of promoting certainty in the identification of rights and
obligations in a business environment where bills of lading may be negotiated
to third party transferees, and on the other hand avoiding excessive rigidity
in a situation where a shipowner is content, subject to the solvency of his
time charterer, to allow his time charterer to dictate both the amount of his
bill of lading freight and the manner of its payment. If those competing
interests cannot be resolved, then a choice will have to be made between them.
Looking at the problem as a matter of construction, the question might be put
in these terms: Does the incorporation in a bill of lading of a sub-charter's
freight provisions ("freight payable as per charterparty dated" such and such)
forbid the amendment without the shipowner's express permission of any part of
such provisions, or is there on the other hand standing authority from the
shipowner for changes, or is the incorporation perhaps to be construed as
referring to the identified charterparty together with its amendments?
29. I shall begin with Leduc v. Ward. That concerned an action brought
by a consignee against a shipowner whose ship had been lost together with the
consignee's cargo during a deviation to Glasgow from the contractual voyage
stipulated in the bill of lading. The shipowner raised by way of defence the
allegation that the shipper had known at the time when the bill of lading was
issued that the ship was intended to proceed via Glasgow. It was held that such
evidence was not admissible to vary the terms of the bill of lading. Lord Esher
MR expressed the general principle in terms of a contemporary restatement of
the parol evidence rule as follows (at 480):
"...and then the general doctrine of law is applicable, by which, where the
contract has been reduced into a writing which is intended to constitute the
contract, parol evidence to alter or qualify the effect of such writing is not
admissible, and the writing is the only evidence of the contract, except where
there is some usage so well established and generally known that it must be
taken to be incorporated with the contract."
Lord Justice Lopes spoke to the same effect (at 485). Lord Justice Fry,
however, went further and said this (at 484/5):
"...but I prefer to rest my judgment on the view that the provision of the
statute making the contract contained in the bill of lading assignable is
inconsistent with the idea that anything that took place between the shipper
and shipowner, not embodied in the bill of lading, could affect the contract."
It is for Lord Justice Fry's ratio that the case has become known as authority
that the consignee of a bill of lading is not affected by any parol
understanding between shipper and shipowner: see The Ardennes [1951] 1
KB 55 at 60 per Lord Goddard LCJ. None of that, however, means that there is
anything to prevent a shipper and shipowner varying their contract in any way
in which contracts may be varied, even if such variation may not affect a
consignee.
30. Where a bill of lading incorporates the terms of a charterparty, however,
the matter becomes more complicated, for in such a case the terms of the bill
of lading are not to be found, or not all to be found, in the bill of lading
itself. It therefore becomes an interesting and difficult question as to
whether a shipper let alone a consignee is to be affected by any alteration in
the terms of the incorporated charterparty. In The Heidberg the somewhat
different issue arose as to whether a consignee was bound by a charterparty
arbitration clause purportedly incorporated into a bill of lading in
circumstances where the charterparty fixture had been agreed orally over the
telephone and that oral fixture itself incorporated the terms of a previous
charterparty. At the time of issue of the bill of lading, the oral fixture,
although evidenced by a "recap" telex, had not been drawn up into an executed
charterparty. This is by no means an uncommon feature of such fixtures. The
charterparty itself may not be drawn up for some time. When it is, the
charterparty will be given the date of the fixture. Such fixtures may, as in
the case of The Heidberg itself, have been negotiated orally, or may
have been made partly orally and partly in writing, or may have been negotiated
entirely in writing. In any such case, a recap document is quite likely, and it
is this which evidences the contract and thus the fixture, pending the
execution of the more formal charterparty. It will often be the case that the
charterparty will not have been drawn up and executed by the time shipment
occurs and a bill of lading which purports to incorporate the charterparty
comes to be issued. Judge Diamond's solution to this problem, drawing on the
rule derived from Leduc v. Ward, appears to have been that such
incorporation fails where the charterparty has not been executed by the time of
the issue of the bill of lading. Thus at 311 he said:
"It would in my view be detrimental to the transferability of bills of lading
and to their use in international trade to hold that an incorporation clause in
a bill of lading is capable of incorporating a charter-party which has not been
reduced into writing. Such a decision would involve that the transferee would
be affected by collateral oral terms which do not appear in any document...
"I therefore consider that, as a matter of the construction of the bill of
lading, it does not incorporate the terms of a charter-party which, at the date
the bill of lading is issued, has not been reduced to writing. For the reasons
given earlier an oral contract, evidenced only by a recap telex, does not seem
to me to qualify for this purpose..."
31. Mr Justice Colman drew on Judge Diamond's reasoning for his own conclusion
that a bill of lading which incorporates the terms of a charterparty is not
affected by collateral variations of the charterparty. I do not think it is
necessary to decide whether Judge Diamond's solution is correct, for it was
based on concern for the position of a transferee rather than the original
parties to the bill of lading contract. It is axiomatic, however, that the
position of a shipper and of a consignee may differ. Nevertheless, his
conclusion that the issue is ultimately a matter of construction is, it seems
to me, correct, as is his insight that this question of construction needs to
be answered with an eye to the broader context.
32. Thus, in the present case, the question of construction might be expressed
by asking, as I have done above, whether the original parties to the bill of
lading contract intended their contract to incorporate the freight provisions
of the sub-charter as it might be varied, at any rate so far as the mode of
payment is concerned.
33. In this connection there is one authority which is of some assistance and
that is Fidelitas Shipping Company Ltd v. V/O Exportchleb [1963] 1
Lloyd's Rep 246 (Mr Justice Megaw), [1963] 2 Lloyd's Rep 113 (CA). There a bill
of lading incorporated a charterparty which had been amended (as to the time
for the commencement of lay-days) prior to issue of the bill. Mr Justice Megaw
held that "as per charter-party" meant "as per the charter-party as it stands
(at least in documentary form) at the date of the issue of the bill of lading"
(at 253). In the Court of Appeal, Lord Justice Harman, with whom Lord Justice
Pearson and Mr Justice Ungoed-Thomas agreed, said this (at 120):
"If one asked what at the date of the bill of lading, that is to say Oct 23,
1960, was the contract of carriage between these parties, it seems to me clear
that it was the charter-party of Oct 6, as amended by the letter of Oct 12, and
that any receiver of the goods who asked what the charter-party was must have
been shown those two documents."
In that case the letter of 12 October was expressed as a formal Addendum.
34. In the present case, the correspondence which evidences the agreements to
allow deductions of the two disbursements from freight are not formal addenda
to the sub-charter. Nevertheless, that correspondence had been brought into
existence on 26 February and 4 March 1998 respectively: the first date was
certainly before the issue of the bill of lading, and the second date was the
same day as completion of the loading of the wheat parcel and the date of its
bill of lading: however, the actual day of issue of the bill of lading was
delayed because of the dispute as to which charterparty it should refer to.
35. There were, however, no submissions regarding the significance of this
chronology. For that reason, and also because of the lack of formality in the
documents which evidence the agreed manner in which freight came to be paid, I
will assume without deciding that the Fidelitas solution cannot be
applied to the present case.
36. Nevertheless, just as it is necessary to take into consideration the fact
that a bill of lading is a negotiable instrument and will in due course come
into the hands of a transferee, so also in my judgment it is necessary to give
weight to the circumstances and context in which a shipowner typically allows
his bill of lading freight to be negotiated by and paid to his time charterer.
The classic exposition is that of Mr Justice Channell in Wehner v. Dene
[1905] 2 KB 92 at 99:
"Now, although the owner has the right to demand the bill of lading freight
from the holder of the bill of lading because the contract is the owner's
contract, yet the owner has also, of course contracted by the charterparty that
for the use of his ship he will be satisfied with a different sum, which will
also in the great majority of cases be less than the total amount of the bills
of lading freights; and, therefore, if the owner were himself to demand and
receive the bills of lading freight as he might do if he chose, he would still
have to account to the charterer or the sub-charterer, as the case may be, for
the surplus remaining in his hands after deducting the amount due for hire of
the ship under the charterparty. Of course, in practice an agent is usually
appointed to receive the bill of lading freight, though not necessarily,
because the captain may receive it himself; and under this charterparty the
captain has to appoint as agent any person whom the charterers may select,
which is a very reasonable arrangement, because if the business goes smoothly
and the charterparty hire is duly paid, the charterers are the persons really
interested in receiving the bill of lading freight. But, if I am right as to
the bill of lading contract being with the owner, then it seems to me to follow
that the agent appointed to receive the bill of lading freight becomes by the
very act of appointment the agent of the shipowner to receive the freight for
him, and the agent's receipt binds the shipowner."
37. Now, since those days, the collection of freight is for the most part of
course no longer carried out by the master, or by agents at the port, but by
direct payments between banks, and charterparties typically contain provisions
relating to the bank account to which payment should be made. If Mr Meeson's
submissions on this issue are correct, then a shipper could not pay a time
charterer, even at his express request, at any different account other than
that stipulated in the charterparty, without being in breach of his bill of
lading contract with the shipowner. In such a case, the shipper could pay the
correct amount of freight to the right party, viz the time charterer, but
because he had paid to an account different from that stipulated in the bill of
lading he would be at risk of having to pay all over again to the shipowner. Or
take this very case: the owner requests of his time charterer a payment of cash
to master; under clause 5 of the time charter, such cash advances "shall be
deducted from the hire". So the owner, pro tanto that $10,000 advance, has
already been paid his outstanding hire. In fact, the $10,000 request has been
passed down the line by the time charterer to Tradigrain Shipping, on the
express agreement that the advance could be deducted from the freight. There
was no obligation on Tradigrain Shipping to provide such an advance, in the
absence of such an agreement. Yet under the judgment under appeal, Tradigrain
must pay that $10,000 again to the owner, on the basis that there was no
agreement within the sub-charter document itself for such a deduction.
38. Such a result combines inflexibility, uncommerciality, and injustice,
against the background where the owner has been prepared to leave all matters
relating to the freight to his time charterer, at any rate as long as the time
charter hire payments are kept up, and where the risk of non-payment of that
hire rests on the owner and no one else. The courts often have to decide which
of two innocent parties have to pay for the default of a third. In the present
context, that problem is resolved by saying that the owner can intervene and
demand that bill of lading freight be paid to himself, but only if that freight
has not already been paid. The rule is designed to ensure that the shipper does
not have to pay twice. Mr Meeson's submission amounts to saying that freight
has not been paid, when in truth it has, because it has been paid in a mode
slightly different from that contemplated by the original sub-charter. It would
be a matter for regret if legal analysis could not find a solution to that
submission.
39. In my judgment, when a shipowner contracts that his freight should be
payable as per a charterparty, he intends, and it is common ground with his
shipper that he does so, that, at any rate until he steps in to claim his
freight upon the failure of his time charterer, the whole manner or mode of the
collection of the freight should be delegated to the time charterer. If the
time charterer changes his bank, or bank account, and asks his sub-charterer to
pay freight to a different account from that mentioned in the sub-charter, it
is of no interest to the shipowner. If the time charterer is willing to accept
freight not only in the form of a direct payment to the nominated account, but
also, for his convenience, in the form of cash disbursements to his shipping
agents, or to the master, then I see no reason why the shipowner should
consider that such arrangements, even if they are different from that
contemplated in the original charterparty, are outside the scope of his
delegated authority to his time charterer.
40. Is there anything in the contractual structure, or in the need to have
regard for the position of the transferee of a negotiable instrument, or in
legal principle, or in authority, which is against that solution? In my
judgment, no.
41. As for the contractual structure, the owner is a party to two contracts,
the time charter and the bill of lading. It is well established, see Wehner
v. Dehn, that the time charter represents the shipowner's real interest in
the venture. His interest in time charter hire is secured by his lien on
cargoes and sub-freights "for any amounts due under this Charter" (clause 18).
The issue of bills of lading is left to the time charterer, subject to any
specific directions. There is an express provision that bills of lading are to
be marked "freight payable as per Charter-Party" (clause 30), which indicates
that the freight terms of bills of lading are to be left entirely to the time
charterer's agreement with his sub-charterers. The bill of lading ultimately
issued was in conformity with that direction. The other party to that bill of
lading, Tradigrain, by contracting that its freight is to be governed by the
sub-charter, also indicates that it is prepared to have its responsibilities
governed by the terms of another contract and by performance under it.
42. As for the position of the transferee and the principle in Leduc v.
Ward , I would have thought that those interests are promoted rather than
compromised by the consideration that a bill of lading marked freight payable
as per charterparty is consistent with and expressive of a delegated authority
to perform the freight obligation in a manner agreeable to time charterer and
sub-charterer, even if somewhat different from the mode set out in the relevant
charterparty itself. In this respect, the consignee's concern is whether he is
still liable to the owner to pay bill of lading freight, or whether it has
already been paid by the shipper (or by a sub-charterer, where, as in this
case, the shipper and the sub-charterer are different persons). He might in
theory be exposed to a claim for freight from the shipowner in two
circumstances: either by reason of the lien over sub-freights or by reason of a
direct claim for bill of lading freight. In either event, he would have to
investigate whether and to what extent freight had already been paid. To do
this, he would not be able to confine himself to an examination of the
contractual documents, which would of course include the bill of lading but
would also (subject to the reasoning in The Heidberg) extend to the
incorporated charterparty and, where appropriate, to any amendments to it made
before the issue of the bill of lading within the rule in Fidelitas. But
he would also have to investigate the facts on the ground : Has freight been
paid? All of it or some of it? By what date? Before or after the notice from
the shipowner to pay freight to him? In other words, there is no avoiding the
need to investigate the facts, as well as the basic contractual documents. But
Mr Meeson's submission requires the examination of the facts to be all the more
meticulous: a consignee could no longer merely ask whether the time charterer
had been paid his freight, and when. He would also have to know whether the
freight had been paid to the right account, and by means of the right
deductions, and so forth. Once he had investigated all that, he would or ought
to be in any event in a position to know whether any variation in the mode of
payment from that laid down in the incorporated charterparty had been agreed.
Having investigated the matter, he would learn, in a case like the present, if
Mr Meeson's submission were correct, that although he was not susceptible to a
lien on sub-freights, nevertheless he was liable to a direct claim to bill of
lading freight. None of this in my judgment is necessary to promote the
principle in Leduc v. Ward and the interests of the transferee. On the
contrary, Mr Meeson's submission, if correct, would leave the consignee exposed
in circumstances where he would not otherwise be exposed; and would require him
to make more extensive investigations of the facts than he would otherwise be
likely to have to carry out.
43. As for authority, there is none contrary to the solution I have suggested
above. But, if Mr Meeson's submission were correct, there must have been many
occasions over the last century when his point could have been taken. The fact
that it would appear not to have been taken provides me with some comfort that
my analysis is correct.
44. I therefore conclude that the deductions agreed with the time charterer in
this case, by means of which the sub-charter freight was pro tanto paid prior
to the owner's intervention, as is accepted by the owner, were a legitimate
mode of performing the bill of lading freight obligation and were within the
authority delegated by the owner (and the shipper) to the parties to the
incorporated sub-charter to vary the mode of payment.
45. Since the owner's claim to bill of lading freight is a claim to summary
judgment, it would have been sufficient to say that there is quite enough in
Tradigrain's opposition to it to entitle Tradigrain to unconditional leave to
defend - in which case my judgment could have been shorter. However, as the
issue has been fully argued before this court, and both parties have treated
the matter as though it fell for decision under RSC Order 14A as well as Order
14, I would conclude that the owner's claim for freight in the sum of the two
deductions totalling $35,931.59 fails.
46. Mr Meeson did not complain that the vice of the agreed deductions was that
the effect of them was that the freight pro tanto was paid to the time
charterer rather than to INC, the nominated payee under clause 46. On the
contrary, it was Mr Males who sought to find in the agreement to pay a third
party, INC, a further reason why the owner's claim to freight under the bill of
lading must fail. It is to that issue that I now turn.
Is a shipowner entitled to maintain a claim for bill of lading freight when
the incorporated sub-charter stipulates for payment to a third party?
47. Mr Males submitted that because the owner had agreed that his bill of
lading freight was to be paid to INC, he no longer had a right to claim for it
in debt in his own name. He could seek specific performance of the promise to
pay INC, or he could claim damages for the failure to pay INC (see Beswick
v. Beswick [1968] AC 58 and CHITTY on Contracts, 28th Edition, 1999,
Vol I at 19-044), but he had no claim in debt.
48. Mr Meeson submitted, in support of the judgment below on this point, that
it was well established that a shipowner could intervene, if he was in time, to
claim payment to himself, even of freight prima facie payable to a time
charterer, and that for these purposes it made no difference in principle
whether the freight was payable to a time charterer or to a total stranger.
49. Nothing is known about INC. It could in theory be an associate company or
indeed a total stranger. It could be a mere nominee for Mercator. It could be a
total stranger with some kind of security interest in the sub-charter freight.
If this was a final trial, then in the absence of any evidence about the status
of INC, one might infer that it was a mere nominee. But in the circumstances it
would not be right to do so.
50. If INC were a mere nominee, then the fact that payment was to be made to it
would be the same as stipulating for payment to Mercator. But Mr Males submits
that even the promise to pay Mercator prevents the owner suing for bill of
lading freight in debt for his own benefit.
51. It is again necessary to distinguish between a claim for bill of lading
freight and a claim to a lien over the sub-freight payable under the
sub-charter. For the latter purposes, it does not of course matter that the
sub-freight in question is payable to a third party such as the time charterer,
since the shipowner enforcing his lien stands in the shoes of the time
charterer. (For that very reason, however, there might be a problem about
enforcing a lien over a sub-freight payable not to the time charterer but to a
total stranger.)
52. Mr Males submitted that in his judgment below Mr Justice Colman failed to
distinguish between the case of the direct claim to bill of lading freight and
the claim to lien, and that it was that failure which led him to hold that the
owner could directly enforce a freight payable to INC. Thus Mr Justice Colman
said (at 96):
"Any shipper and sub-charterer entering into a bill of lading contract with the
shipowner knows that, as an everyday incident of international commerce, if a
disponent owner defaults under the head charter the freight identified in the
bill of lading may be intercepted at any time before it has been paid in
accordance with the sub-charter. Until such payment has been made, the
shipper's obligation to the shipowner is to pay the freight to him upon notice
to do so having been properly given. Whether or not it has been properly given
depends as between the shipowner and the disponent owner upon whether the
shipowner is entitled to exercise his so-called lien on sub-freights under the
head charter. That being the contractual regime involved, I conclude it can
make no difference in principle whether the payee designated under the
sub-charter is the disponent owner or some other party."
I do not agree that Mr Justice Colman was there confusing the direct claim with
the claim by way of lien: but he was seeking to demonstrate the regime under
one by analogy with the other, and the question is whether that is legitimate.
He was right of course to say that it has long been established and recognised
that a shipowner can intercept to claim his freight directly from the shipper
at any time before it has been paid. Although the word "intercept" is perhaps
more redolent of a claim by way of lien, it, or its equivalent "intervene" has
traditionally been used to describe the direct claim as well: see Molthes
Rederi v. Ellerman's. In that case Mr Justice Greer said this (at 715):
"That he can intervene successfully before receipt of the freight by the agent
seems to me to be the necessary consequence of holding as Channell J did in the
case cited, that the bill of lading contract is a contract between the
shipowner and the shipper, and not a contract between the charterers and the
shipper. If this be so, the legal right to the freight is in the owner and not
in the charterer, and the former can intervene at any time before the agent has
received the freight, and say to him, "I am no longer content that the
charterer should collect the freight. If you collect it at all, you must
collect it for me.""
53. It is not clear from the facts of that case whether the bill of lading
there provided for freight to be payable as per charterparty, or whether it was
simply the practice of the shipowner to allow the sub-charter freight to be
paid in the ordinary way to the time charterer. There is a similar uncertainty
about the facts in Wehner v. Dene. In India Steamship Co v. Louis
Dreyfus Sugar Ltd (The Indian Reliance) [1997] 1 Lloyd's Rep 52,
however, I had to consider a case where the bill of lading did state that
freight was payable as per charterparty. That charterparty nominated an account
of the time charterer (Cosemar) for payment of the freight. I said this (at
57/58):
"In my judgment the expression "Freight payable as per charterparty" did
incorporate cl.9 of the sub-charter, so as to make freight payable to the
nominated account. Whether that is to be treated as a payment due to Cosemar,
or due to the owners but payable to Cosemar does not, I think, for present
purposes matter, but I would be inclined to say the latter."
54. Mr Justice Colman relied on that passage in the present case to conclude
that payment to a third party, whether the time charterer or some other third
party, did not prevent the shipowner's intervention, if it be in time.
55. If that is the law, and I think that it has been believed to be the law for
a long time, the analysis needs some clarification. As I suggested above, the
direct claim cannot just be conflated with the claim by way of lien, because in
the latter case, unlike the former, the freight is due to the time charterer
but (as authority suggests) is assigned to the shipowner. In the former case,
however, the freight is the shipowner's freight, but directed to be paid to a
third party. In The Indian Reliance I did not need to determine the
question whether a shipowner could make a direct claim to freight which under
the bill of lading was payable to the time charterer, because I found that the
freight in question had already been paid at the time of the shipowner's
intervention. I expressed the tentative view, however, that the bill of
lading's incorporation of the voyage charter's freight terms meant that the
payment of freight was to be treated as due to the shipowner but payable to the
time charterer. I did not need to take the analysis further in that case.
56. In the present case, however, the argument has been squarely taken by Mr
Males that a debt payable to a third party cannot be sued for as a debt by the
promisee. Prima facie that might seem to be correct, but as CHITTY
remarks in the passage at 19-044 cited by Mr Males -
"The objection loses much of its force if the promisor would not in fact be
prejudiced by having to pay the promisee rather than the third party."
There is then a reference in footnote 97 to para 19-060, where the following
appears:
"But the question whether the promisee [the owner] can unilaterally (ie without
the consent of the promisor) [Tradigrain] demand that payment be made to
himself depends once again on the construction of the contract. If the contract
can be construed as one to pay the third party "or as the promisee shall
direct" then the promisee is entitled to demand payment to himself."
57. In my judgment the typical case of the bill of lading in which freight is
payable as per charterparty is probably such a contract. The freight is due to
the shipowner, as his consideration for the agreed carriage, but the shipowner
directs that it be paid in the manner set out in the sub-charter. The
construction which I propose would also be entirely consistent with the regime
under the time charter, under which the lien over sub-freights indicates that
the sub-charter freight is, in the event of a default under the time charter,
to be subject to the shipowner's claim. In such circumstances, it would seem to
make no difference whether the payee under the time charter is the time
charterer himself, or some other third person, unless perhaps that third person
has been given a secured right to the freight which clashes with the time
charterer's and shipowner's rights. If that had happened in the present case,
however, it might seem likely that INC would have come onto the scene.
58. I have expressed these views in deference to the submissions which have
been addressed to the court. In circumstances, however, where the answer on the
first issue relating to the deductions resolves Tradigrain's appeal in respect
of the claim to freight, I would prefer to rest my decision on that first
issue.
Is there an implied term in every bill of lading, in the absence of contrary
provision, that a shipper will discharge the goods and will do so in a
reasonable time?
59. The sub-charter's laytime and demurrage regime is set out principally in
the following clauses:
"5. Cargo shall be loaded, spout-trimmed and/or stowed at the expense and risk
of Shippers/Charterers at the average rate of 2,250 metric tons per weather
working day of 24 consecutive hours or prorata, Saturdays, Sundays and Holidays
excepted, even if used. See cl no 8.
"Cargo shall be discharged at the expense and risk of Receivers/Charterers at
the average rate of See clause no 49."
(Clause 8 contains a detailed laytime clause which I need not set out, not
least because it says "For discharge, see clause 49.")
"9. Demurrage is payable by Charterers at the rate of USD 4,200...per day of 24
consecutive hours or pro rata. Owners shall pay to Charterers despatch money
for working laytime saved in loading/discharging at the rate of USD 2,100...per
day of 24 consecutive hours or pro rata.
"49. Discharging terms:
(a) Vessel to be discharged at the average rate of 2,000 metric tons per
weather working day of 24 consecutive hours, Saturday noon, Sundays and
Holidays excepted, even if used.
(b) Time from Saturday noon or from 5 pm on days preceding a Holiday until
Monday 8 am or next working day at 8 am not to count even if used, unless
vessel already on demurrage.
(c) Notice of Readiness to be tendered by cable only during official working
hours and laytime shall start to count at 08:00 hours next Working day
following presentation of Notice of Readiness, whether in berth or not,
whether in port or not, whether in free pratique or not, whether custom
cleared or not."
60. In The Miramar [1984] AC 676 the House of Lords had to consider
whether the incorporation of a charterparty in a bill of lading was effective
to incorporate laytime and discharging provisions which made demurrage payable
by the "Charterer". If the incorporation of such clauses was to be effective,
then the word "Charterer" would have to be manipulated so as to read "bill of
lading holder". In declining to manipulate this language and thus to give
effect to the incorporation of such provisions, Lord Diplock said this (at
685):
"My Lords, I venture to assert that no business man who had not taken leave of
his senses would intentionally enter into a contract which exposed him to a
potential liability of this kind; and this, in itself, I find to be an
overwhelming reason for not indulging in verbal manipulation of the actual
contractual words used in the charterparty so as to give to them this effect
when they are treated as incorporated in the bill of lading. I may add that to
do so would raise a whole host of questions as to how the liability is to
operate as between different consignees of different parts of the cargo, to
which questions no attempt has been made to vouchsafe any answer, let alone a
plausible one. To give some examples: is any personal liability for demurrage
incurred by consignees of cargo which has been discharged before the expiry of
laytime? If the discharge of a consignee's cargo takes place after the vessel
is on demurrage is his liability to pay demurrage limited to the amount of
demurrage accrued after the expiry of laytime and up to the time when the
discharge of his part of the cargo is complete? Is each consignee liable for
all demurrage accrued while his cargo remains on board? Is the liability of
each consignee to pay demurrage several? If the shipowner chooses to sue one
consignee of part of the cargo for the full amount of demurrage has that
consignee any right of contribution against consignees of other parts of the
cargo and, if so, against which of them and upon what basis?"
61. Although the laytime and demurrage provisions of that charterparty and the
sub-charter in the present case are not identical, enough of what Lord Diplock
there said is applicable to make it sensible to ask whether the shippers in
this case can as reasonable businessmen be thought of as intending to enter
into obligations to discharge in accordance with the sub-charter terms in
circumstances where it could be contemplated that they, as distinct from their
receivers, would have no control over such discharge, and where the sub-charter
itself refers to the charterer, or the receiver/charterer, as being
responsible, but not the shipper (see clauses 5 and 9). It was for such reasons
that Mr Justice Colman held that such terms were not to be incorporated into
the bill of lading. I do not dissent from that view, but an alternative
possibility might well be that the sub-charter's laytime and demurrage code is
incorporated into the bill of lading, with the effect that shippers (and the
sub-charterer Tradigrain Shipping) are to be responsible for laytime and
demurrage in loading and receivers (and the sub-charterer) are to be
responsible accordingly in discharge. In that case, the only manipulation
necessary would be for "Charterers" in clause 9 to be read as meaning
"Charterers and Shippers or Receivers as the case may be", which would perhaps
not be difficult.
62. However, it seems to me to be unnecessary to choose between these
alternatives. In any event, the shippers would not be responsible under the
terms of the incorporated sub-charter for demurrage at discharge.
63. Nevertheless, Mr Justice Colman decided that a term should be implied that
the shippers would discharge the vessel in a reasonable time. I agree that if a
term is to be implied making the shippers responsible for discharge, then it
would also have to be implied that such discharge should be performed in a
reasonable time. But the question is whether the responsibility of discharging
the wheat and corn parcels is to be imposed on the respective shipper.
64. In one sense it might be said in the abstract that a shipper ought to
undertake to discharge a ship which he has loaded. In another sense, it might
be thought to be unreasonable for him to undertake a liability over which he
has no control, and to be unnecessary if the correct implication is that the
receiver will discharge. It is classic law that no term should be implied which
is not both reasonable and necessary. If therefore any term is to be implied,
then it might seem preferable to formulate it in terms that the receiver would
discharge in a reasonable time; alternatively that the ship would be discharged
in a reasonable time by the holder of the bill of lading, be he shipper or
receiver.
65. In this connection it is worth considering what other remedies a shipowner
has in relation to discharge. Where at any rate the ship is under charter, the
shipowner's principal remedy is under his charterparty. Such a charterparty,
where it is a voyage charter, will be able to make detailed provisions for
laytime and the calculation and payment of demurrage both at loading and
discharge, and such provisions are commonly incorporated into bills of lading -
even if The Miramar has now indicated limits to the incorporation of
inappropriately drafted clauses. Even where the bill of lading does not
incorporate the voyage charter demurrage provisions, the shipowner will still
have an equivalent remedy to enforce payment of demurrage from the bill of
lading holder in the form of a lien on the cargo for demurrage: The
Miramar at first instance and in the court of appeal (the point was no
longer live in the House of Lords) demonstrates that the voyage charter's lien
clause will be incorporated even where its demurrage provisions are not, see at
[1983] 2 Lloyd's Rep 319 at 324/5 per Mr Justice Mustill and [1984] 1 Lloyd's
Rep 142 at 144 per Sir John Donaldson MR. Mr Justice Mustill said (at 324) that
"It has been a feature of shipping practice for many years that the shipowner
looks primarily to his lien in case of dispute, and no doubt has ever been
raised about the acceptability of a situation where the lien is more extensive
as against consignees than their own direct personal liability..."
Where, on the other hand, as in the present case the voyage charter is a
sub-charter, the shipowner has no charter claim for demurrage, and therefore no
lien for demurrage under the incorporated lien clause, unless he has a direct
claim for demurrage under the incorporated provisions of his bill of lading.
Nevertheless, he has chosen to trust to his time charterer under his time
charter, under which the expenses of discharge will be imposed on his time
charterer and he will be compensated for delay at the discharge port in the
form of daily hire.
66. In these circumstances, where the risk of delay at discharge is typically
provided for either under specific fixed laytime and demurrage provisions or in
the form of time charter hire, the imprecision of a demurrage term based on a
reasonable time seems to have an old-fashioned ring. SCRUTTON comments
(at footnote 57 on page 317) that it is now "extremely rare" for (voyage)
charters not to make specific provision as to the time for loading and
unloading. The reason is that where laytime is fixed, the risk of delay from
any cause (typically congestion) is on the charterer/consignee, absent agreed
exceptions. Where, however, the laytime is not fixed but the test is that of a
reasonable time, the risk of delay, other than that caused by the
charterer/consignee is, broadly speaking, on the shipowner. That is why
provisions for a fixed laytime have almost entirely superseded the former
regime. It follows that where a liability for demurrage has to be found by way
of implication, although there is nothing whatsoever strange in principle with
the implication of a reasonable time, for that is the classic implication where
the time for performance is left at large, it results in a situation which is
at odds both with modern shipping practice and also with the demurrage
calculations which will otherwise be made at the discharge port under the
voyage charter.
67. Mr Meeson nevertheless submits, and it is true, that an obligation to
discharge within a reasonable time avoids the most perverse of the effects to
which Lord Diplock drew attention in The Miramar. Moreover Mr Meeson
points out that in the ordinary case the liability for discharge will in any
event fall on the receiver, but still contends that that is no reason why there
should not also be a residual liability on the shipper, who remains liable even
after transfer of the bill of lading. The shipper, he further submits, will
have his remedy against the receiver, his buyer, under his sale contract.
68. Mr Meeson also complains that part at least of the reason for the delay in
discharge of the vessel in the present case was that there was (at any rate for
a time) no receiver for the wheat parcel. The evidence concerning such matters
is not before the court. The fact is, however, that the Congenbill form
contemplates that there will be a consignee. Moreover, the implication of the
term found by Mr Justice Colman was derived as a matter of general principle,
and was not ad casum. Nor is the owner's case based on an allegation that
Tradigrain was the receiver, or still the holder of the wheat bill of lading at
any relevant time. On the contrary, Mr Meeson was at pains to emphasise that
under the terms of the Carriage of Goods by Sea Act 1992 a shipper remains
liable for his obligations even after transfer of the bill: see section 3(3).
Thus it is that the owner seeks the same implied term against both shippers,
Tradigrain and Finagrain, irrespective of particular circumstances relating to
any dealing with the bills of lading or difficulties at the discharging
port.
69. The real basis of Mr Justice Colman's implied term was the authority of
Fowler v. Knoop and SCRUTTON. I have cited the relevant passage
of his judgment above.
70. Mr Males submits, however, that Fowler v. Knoop is not authority for
Mr Justice Colman's holding, and that the entry in SCRUTTON is in error,
even though it originates in an edition for which Lord Justice Scrutton had
responsibility.
71. In Fowler v. Knoop the plaintiff owner sued the consignee for
demurrage at the discharging port. There is nothing in the facts to suggest
that the terms of a charterparty were incorporated in the bill of lading, other
than as to freight ("they paying freight for the goods as per charterparty").
Nevertheless the consignee sought to derive advantage from the charterparty
provision that the cargo was to be discharged "as fast as the custom of the
port will allow": he submitted that this superseded the implied contract in the
bill of lading to deliver the cargo within a reasonable time. It appears that
it was common ground that the bill of lading contract contained such an implied
obligation. The jury had found, however, that there was no custom of the port.
The court of appeal therefore held that it need not decide on the consignee's
contention, since there was nothing in the charterparty ("even under the
charterparty, reasonable despatch should be used" (at 304)) to vary the implied
bill of lading contract. It may be said therefore that the case is an authority
for nothing, since the only point in dispute was made redundant by the jury's
finding. At most the case demonstrates that the court was prepared to sanction
the common ground position that the bill of lading contained an implied
contract to take delivery of the cargo within a reasonable time. Since,
however, the defendant was a consignee, not a shipper, it is not clear that the
implied contract would embrace the shipper. It is true that the implied
contract was expressed in the passive, without reference to party ("The implied
contract is that the ship shall be discharged within a reasonable time..." , at
304), but the position remains that the effect of this implication on a shipper
never had to be considered.
72. Nevertheless, the case of Fowler v. Knoop led SCRUTTON to
say, as it has done from the time when it was edited by Lord Justice Scrutton
down to the present day, that "There is contained in every bill of lading an
implied contract by the consignor to unload the goods in a reasonable
time" (emphasis added). Apart from Fowler v. Knoop two other authorities
are mentioned at footnote 73 on page 319 of the current edition (20th Edition,
1996) in support of that proposition. The first, The Clan Macdonald
(1883) 8 PD 178, is principally a case on section 67 of the Merchant Shipping
Amendment Act, 1862, and to that extent has little to do with the issue under
discussion. However, at page 184 and again at page 185 Sir James Hannen
remarked that it was the duty of the consignees to take delivery of their goods
within a reasonable time after they were on notice that they could receive
them. That again takes the matter no further, especially as under the express
terms of the bills of lading (see at 179) the obligation of discharge was upon
the consignee. The third of the authorities cited at footnote 73 is Tillett
v. Cwm Avon (1886) 2 TLR 675. That was again a case involving consignees.
As in Fowler v. Knoop, none of the provisions of a charterparty had been
incorporated save as to freight. The shipowner contended that the consignees
were under an implied obligation to discharge within a reasonable time; the
consignees did not dispute that proposition, but denied that there had been any
delay. The court disagreed, and Manisty J with whom Hawkins J agreed said that
there was a "general principle of law that where a person undertook to
discharge a vessel he must do so within a reasonable time". Again, nothing was
in dispute but the facts. The nature of these cases support the concept that,
where there is an obligation to discharge, there is an obligation to discharge
within a reasonable time. The question remains as to who has (implicitly) the
obligation to discharge. Mr Justice Colman spoke (at 100) of "shippers or
receivers", but that may be said to leave the question unanswered. Of course,
if the shipper is also the receiver, so that the bill of lading is never
transferred, then the obligation will fall on him in any event.
73. Mr Meeson did not disagree that there was little or nothing in those three
authorities to support the implied term spoken to by SCRUTTON, but
submitted that the term was nevertheless well founded. He sought to support it
on the basis of a further authority in the form of Cawthron v. Trickett
(1864) 15 CB (NS) 754, since that case concerned a shipper: but the decision
turned on an express term in the bill of lading that "the vessel to take her
regular turn in unloading", and the court not surprisingly read that as a
"contract on the consignor's part that the ship shall take her regular turn in
unloading" (per Erle CJ at 758).
74. Thus far I would conclude that an implied term binding the shipper is not
impossible, but that there is no authority (other than SCRUTTON's) to
support it. I would agree with Mr Justice Colman that there is nothing in
The Miramar that deals directly with the question of such an implied
term. But equally there is no support there for the suggestion that such an
implied term underlies a failed attempt to incorporate a charterparty's
demurrage provisions into a bill of lading; and the discussion focuses
generally on the unreasonable results that may occur if a party is held
responsible for activities at a port where it has no business.
75. I would be inclined to say that the most that could be implied into a bill
of lading which was otherwise silent as to the matter of discharge is that the
holder of the bill of lading who presents the bill of lading in order to obtain
delivery of the cargo is responsible, irrespective of whether that is the
shipper or receiver: see, for instance, Blackburn J in Ford v.
Cotesworth (1868) LR 4 QB 127 at 137, a case which, although not mentioned
in the judgment in Fowler v. Knoop, was cited to the court (see at 303).
But that is not the implied term for which Mr Meeson has contended.
76. Be that as it may, and even if SCRUTTON's implied term does bind the
shipper, its implication has to be capable of surviving the incorporation of
the sub-charter terms. Mr Justice Colman held that the sub-charter's laytime
and demurrage provisions were not effectively incorporated, and that that left
the implied term in place. I do not see, however, how clause 5, with its
division of responsibility for loading and discharging the vessel between
shipper and receiver respectively, can be used as a reason for refusing to
incorporate the sub-charter's discharging provisions into the bill of lading
and yet disregarded for the purpose of implying a term that the shipper, as
distinct from the receiver, is to be liable for discharge of the vessel. There
is no discussion in the judgment below of the effect of the sub-charter terms
on the implication in the bill of lading of a term relating to discharge by the
shipper.
77. Mr Meeson submitted that it was illegitimate to look at the
non-incorporated terms of the sub-charter in order to construe the bill of
lading. He says that such terms are res inter alios acta and irrelevant.
He cited no authority for that proposition.
78. In my judgment his submission is not well founded. The first rule relating
to the incorporation of one document's terms into another document is to
construe the incorporating clause in order to decide on the width of the
incorporation. Thus in the shipping context it is now well established that a
general incorporation of a charterparty's terms into a bill of lading is only
apt to incorporate terms relating to the shipment, carriage and discharge of
the cargo, and not other terms, of which (in the absence of express provision)
a famous example is the arbitration clause: see T W Thomas & Co Ltd v.
Portsea Steamship Co Ltd [1912] AC 1. A second rule, however, is to read
the incorporated wording into the host document in extenso to see if, in that
setting, some parts of the incorporated wording nevertheless have to be
rejected as inconsistent or insensible when read in their new context: see eg
Porteus v. Watney (1878) 3 QBD 534 at 542, per Brett LJ:
"But then there is another rule which applies, which is, that if taking all the
conditions to be in the bill of lading, some of them are entirely and
absolutely insensible and inapplicable, they must be struck out as insensible;
not because they are not introduced, but because being introduced they are
impossible of application."
79. Sometimes the two rules have been read together, as in Hamilton & Co
v. Mackie & Sons (1889) 5 TLR 667, but more recently they have been
recognised as distinct approaches, see Skips A/S Nordheim v. Syrian
Petroleum Co (The Varenna) [1984] 1 QB 599. In determining that second
question, the court has to have regard to the wording of both documents, to the
extent that the charterparty is prima facie incorporated. In such circumstances
if a demurrage regime which would put the responsibility of discharging upon a
shipper has to be first considered and then rejected, as it was below, inter
alia because of a clause (clause 5) which would place such responsibility only
upon a receiver or charterer and not upon a shipper, I do not see what room
there remains for implying a clause which would make a shipper liable for
discharge. The discharge regime of the incorporated sub-charter, although (or
even if) ineffective in the bill of lading and thus ultimately discarded,
sufficiently negatives the implication in the bill of lading of a liability for
discharging which is to rest on the shipper. It would after all be entirely
anomalous if a shipowner, who was content to leave his bill of lading terms to
be defined by his time charterer's sub-charter, should be able to say that it
was necessary and reasonable to imply into his bill of lading a term which ran
counter to the structure of that sub-charter. I know of no case in which a term
relating to discharge port demurrage has been implied into a bill of lading
which has sought to incorporate in general the terms of a charterparty.
80. On the contrary, in SA Sucre Export v. Northern River Shipping Ltd (The
Sormovskiy 3068) [1994] 2 Lloyd's Rep 266 at 285/6 Mr Justice Clarke
considered a somewhat similar question. There a shipowner was claiming
discharge port demurrage from a receiver under a bill of lading with a general
charterparty incorporation clause. As in this case the charterparty provisions
imposed liability upon the charterer but otherwise divided responsibility for
loading and discharge between shipper and receiver. However, in the critical
demurrage clause, mention was only made of the charterer and the form's
reference to "receivers at discharging port" had been deleted. Mr Justice
Clarke therefore held that the clauses, which he seems prima facie to have
considered to have been incorporated, did not make the receiver liable for
demurrage; alternatively, he held that the laytime and demurrage provisions
were not incorporated (at 286). It is true that there was no further argument
by the shipowner in favour of an implied term, but that case would seem to
illustrate how the idea of such an implication is absent from the situation
there, as here, under consideration. It also demonstrates how the difference
between ultimate incorporation and rejection may be a fine one.
81. For these reasons, I conclude that even if a term that a shipper is
responsible for discharging can be implied into a standard bill of lading, it
is not to be implied in a bill of lading which seeks to incorporate, albeit
ineffectively, a regime which would excuse a shipper from liability for
discharge and place it solely on a receiver or charterer.
Conclusion
82. In conclusion, the shippers' appeal succeeds. The owner's claim to freight
fails as to the $35,931.59 paid by way of set off of the advances made by
Tradigrain Shipping on Mercator's express agreement to permit such advances to
be deducted from freight. Moreover, there is no liability on the shippers to
discharge the vessel within a reasonable or any other time. It follows that the
owner's counterclaim for discharge port demurrage against the shipper must
fail.
Lord Justice Brooke:
83. I agree.
Lord Justice Henry:
84. I also agree.
Order: Appeal allowed. Claimant's costs summarily assessed in the sum
of £32, 00. Orders made under paragraphs 2 & 3 of minute of order.
Application for permission to appeal to the House of Lords refused.
(Order does not form part of approved judgment.)
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