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DMC/SandT/15/0009
'''England'''
'''Metall Market OOO v Vitorio Shipping Co Ltd (The “Lehmann Timber”)''' '''English Court of Appeal: Arden, Patten LLJ andSir Bernard Rix: [2013] EWCA Civ 650: [2014] QB 760, [2013] 2 Lloyd’s Rep 541'''
Miss Claire Blanchard QC, instructed by Stephenson Harwood LLP, for the Respondent
Mr Chirag Karia QC, instructed by Clyde & Co, for the Appellant
'''CARRIAGE OF GOODS: GENERAL AVERAGE: REQUEST BY SHIPOWNER FOR SECURITY IN THE FORM OF GENERAL AVERAGE BOND SUPPORTED BY GENERAL AVERAGE GUARANTEE: WHETHER TERMS OF REQUEST REASONABLE: WHETHER ACCEPTANCE OF PART SECURITY A WAIVER OF SHIPOWNER’S LIEN: WHETHER EXPENSES OF STORING CARGO ASHORE IN EXERCISE OF LIEN RECOVERABLE''' '''Summary'''
Despite requests by the shipowner for General Average security in the form of a bond signed by the consignee and supported by an insurer’s guarantee, the consignee did not sign a bond and only provided an insurer’s guarantee for a small portion of its cargo. Instead of releasing the cargo to the consignee, the shipowner exercised its lien for general average contributions by directing the vessel to a location other than the discharge port and discharging the cargo into a warehouse there. The Court of Appeal held that the terms of the security demanded by the shipowner were reasonable and that acceptance of a partial guarantee would not amount to a waiver or automatic discharge of the shipowner’s lien. Further, the shipowner was entitled to recover the storage expenses as part of the expenses incurred in exercising its lien.
This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.
'''Background'''The claimant, Vitorio Shipping Co Ltd (the “Owner”), was the demise-chartered owner of the vessel “Lehman Timber” (the “Vessel”). The cargo onboard on board during a voyage from Changsu in China to St Petersburg in Russia included 1,089 steel coils (the “Cargo”) under four separate bills of lading, of which the defendant, Metall Market OOO (the “Consignee”), was the consignee. Only the cargo under one of the bills (the 4th bill) in respect of 98 coils was insured. The conditions of carriage set out on the reverse of the bills of lading provided for general average to be adjusted, stated and settled according to the York-Antwerp Rules 1994 in London.
During the voyage, the Vessel suffered two general average incidents. The Vessel was first captured whilst transiting the Gulf of Aden and held by pirates for 42 days. A substantial ransom was paid. On her release and en route to Salalah in Oman, the Vessel suffered a main engine breakdown and had to be towed there.
The Consignee appealed against the arbitral award on two questions of law:
(1) Whether the Owner had waived its lien for cargo’s general average contribution when it requested from the Consignee a bond and an insurer’s guarantee as the price for giving up the lien, but had received an insurer’s guarantee for only a small portion of the cargo; and
(2) Whether the Owner’s exercise of its lien for general average contribution prevented it from recovering the continuing expense of looking after the Cargo in the warehouse at Hamina.
At first instance, Popplewell J (see [2012] EWHC 844 (Comm)) answered the first question in favour of the Owner but the second question in favour of the Consignee. The Judge held that the principle in Somes v British Empire Shipping Co (1858) EB & E 353, (1859) EB & E 367, (1860) 8 HL Cas 338 prevented the Owner from recovering the expenses of looking after the Cargo.
Both the Owner and the Consignee appealed to the Court of Appeal.
'''Judgment'''
Sir Bernard Rix gave the leading judgment of the Court of Appeal, with whom Arden and Patten LJJ agreed. The Court held in favour of the Owner in respect of both issues.
