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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Metall Market OOO v Vitorio Shipping Company Ltd & Anor [2013] EWCA Civ 650 (07 June 2013)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/650.html
Cite as: [2013] 2 Lloyd's Rep 541, [2014] QB 760, [2013] 1 CLC 979, [2014] 2 WLR 979, [2013] WLR(D) 221, [2013] EWCA Civ 650, [2014] 1 QB 760, [2013] 2 All ER (Comm) 585
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A3/2012/1127 |
ON APPEAL FROM HIGH COURT, QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE POPPLEWELL
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE PATTEN
And
SIR BERNARD RIX
____________________
| Metall Market OOO |
Appellant |
|
| - and - |
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| Vitorio Shipping Company Limited The Lehmann Timber |
Respondent |
____________________
Mr Chirag Karia QC (instructed by Clyde & Co) for the Appellant
Hearing dates : Wednesday 21st November 2012
Thursday 22nd November 2012
____________________
Crown Copyright ©
- This appeal raises two questions of some importance relating to general average. One is whether a shipowner's lien for cargo's general average contribution was waived when the shipowner requested from the consignee of the cargo a bond and insurer's guarantee, or a cash deposit, as the price for giving up his lien, but only received an insurer's guarantee (and that for only a small part of the cargo, carried under one of four bills of lading) and no bond or deposit. The other is whether the exercise by the shipowner of his lien for general average contribution prevented him from recovering the costs involved in exercising that lien in terms of the continuing expense of looking after the cargo instead of being able to discharge it. An arbitrators' award decided both questions in favour of the shipowner. An appeal to the commercial court resulted in the first question being upheld in favour of the shipowner (and thus the consignee's counterclaim in conversion failing), but in the second question being decided in favour of the consignee. The arbitrators' award (their "Second Final Declaratory Award") was dated 22 July 2011 and is the award of Messrs Trevor Harrison, Anthony Scott and Christopher Moss. The commercial court judgment is that of Mr Justice Popplewell, reported at [2012] EWHC 844 (Comm).
- The shipowner is Vitorio Shipping Company Limited, the demise chartered owner of the Lehmann Timber (the "owner"). The consignee is Metall Market OOO, a Russian company (the "consignee" or "cargo", referred to as "MMO" in the award). The voyage was from Changsu in China to St Petersburg in Russia, where the consignee's cargo of 1089 steel coils was to have been discharged. A further cargo of hatch covers was loaded on deck at Nantong in China for carriage to Warnemunde in Germany and delivery there to another consignee. We are not concerned with that deck cargo. At the time the vessel was on her maiden voyage, and had been time chartered by the owner to Lehmann Chartering GmbH & Co KG and had been voyage chartered by Lehmann Chartering to Powerful Asia Group Limited of Hong Kong under an amended Gencon charter (the "voyage charter") dated 1 April 2008. (The deck cargo was carried under a separate voyage charter.) The cargo of steel coils (the "cargo") was carried under four separate bills of lading, nos 1, 2, 3 and 4. Bills of lading 1 and 3 were negotiable bills consigned to the order of Bright Universal Group Ltd but named the consignee as the notify party. Bills of lading 2 and 4 were "straight" bills of lading consigned directly to the consignee. Bill of lading 1 was for 215 coils, bill of lading 2 was for 365 coils, bill of lading 3 was for 411 coils, and bill of lading 4 was for 98 coils, ie only some 9% of the total cargo. Only the cargo under bill of lading 4 was insured, which was why an insurer's guarantee was forthcoming for that parcel but none of the others. Although bills of lading 1 and 3 could in theory have been transferred to another party, they were not, so that Metall Market was the consignee of the whole cargo of 1089 steel coils at St Petersburg.
- On her voyage from China to Russia the vessel suffered two general average incidents. First, whilst transiting the Gulf of Aden on 28 May 2008, the vessel was captured by pirates and held for 42 days off Somalia until on 8 July 2008 a substantial ransom was paid. Secondly, on her release, the vessel sailed for Salalah in Oman but en route suffered a main engine breakdown and had to be towed to Salalah, where she arrived on 21 July. The owner declared general average and the arbitrators were subsequently to decide that both the payment of the ransom and the cost of the tow were allowable general average disbursements. The arbitrators also held that the total general average disbursements were a little over $3.5 million (plus interest, commission and adjusters' fees) and that the consignee's liability was nearly 29% of that total. Many of those matters were at issue in the arbitration, but no longer are.
- After the declaration of general average, the owner appointed Stichling Hahn Hilbrich as average adjusters (the "adjusters"), and the adjusters in turn requested the cargo interests to provide general average security in the form of a general average bond to be signed by the cargo interests themselves and support for the bond in the form of a general average guarantee from cargo insurers or else a cash deposit. The receivers of the hatch covers provided a bond and insurer's guarantee and the hatch covers were delivered to them in Germany on 9 September 2008. The vessel then made for St Petersburg where she arrived off the port on 20 September 2008. However, no bond was provided by the consignee and an insurer's guarantee for only the cargo under bill of lading 4 was forthcoming. No guarantee or deposit was provided for any other part of the consignee's cargo. Repeated requests were made for the missing security but nothing further was supplied. Although there appears to be no finding in the award of when and how the consignee presented bills of lading and requested discharge of the cargo, it seems nevertheless to have been assumed that this was done at some time. The award merely states (at para 2.9): "MMO was eager to obtain delivery of the long-delayed Cargo". However, in the absence of the missing security, the owner was cautious to preserve its lien for general average contribution. The award found that the amount and form of security sought was reasonable, and that the consignee's failure and refusal to provide the missing security were unreasonable and unaccountable.
- The owner was unwilling to berth on advice that the vessel would be forced to discharge and it would be impossible in practice to prevent the consignee obtaining possession of the cargo. It was also concerned that it would be forced to berth and discharge. Therefore, after waiting until 25 September off St Petersburg, the owner sailed to nearby Hamina in Finland, where it discharged the cargo into a warehouse, subject to its lien, where it remains to this day. The vessel berthed at Hamina on 1 October and discharged by 8 October 2008. Whilst at Hamina the vessel was arrested (or otherwise detained) at the suit of the consignee, but a successful challenge to that procedure enabled the vessel to leave on 17 October. Insurance and storage charges for the cargo at Hamina have been mounting at some $20,000 per month.
- The award (or the first award which preceded it) finally disposed of many issues debated between the parties. The hearing for the second award alone lasted six days. The evidence of thirty witnesses of fact or expert opinion was considered. The range of issues is referred to in para 1.2 of the award and included "issues of seaworthiness, public policy as regards the legitimacy of paying a ransom to pirates, liens, bailment and conversion, the identity of the carrier and title to sue, divergent expert opinion in respect of the causes of mechanical breakdown, the quantum of many sums claimed, the value of the cargo, numerous conflicts in respect of the factual evidence and the difficulty of issuing a final average adjustment when some of the cargo is still, arguably, short of its destination".
- The arbitrators' essential findings are encapsulated in the following summary at para 1.15 of their award:
- In this context, the two questions of law which have come to the court on appeal have been limited, and were framed in these terms:
- The bond and guarantee requested of the consignee by the adjusters were in standard forms issued by those adjusters.
- The "Average Bond" requested was for signing by receivers of the cargo, defined by reference to all four bills of lading and described as "1089 Coils…5,796.64 metric tons". Separate bonds were not requested in respect of each bill of lading and their separate portions of the consignee's cargo, nor is there any finding that the consignee asked for or offered a form of bond which related to only bill of lading 4 and its portion of the cargo. On the contrary, the award finds that the security requested was "reasonable in principle, form, amount and circumstance" (see above). The bond stated in material part:
- The "Average Guarantee" was signed on behalf of the insurer of the 98 coils carried pursuant to bill of lading 4. A box at the foot of the guarantee referred to bill of lading 4 and to the 98 coils. The guarantee stated that it was "to avoid collection of Deposits" and continued:
- All four bills were on the same Gencon form, marked freight prepaid. The "Conditions of Carriage" set out on the reverse stated:
- Chapter 12 of the award is headed "Unjustifiable Deviation" and was concerned inter alia with the consignee's submission that the diversion of the vessel from St Petersburg to Hamina was unjustifiable. The arbitrators rejected that submission. They found as follows:
- Chapter 13 of the award is headed "Advice From, and About the Options Available in, St Petersburg" and revisited the options available to the owner at St Petersburg. The arbitrators concluded:
- Chapter 14 of the award is headed "The Lien, GA Security, Bonds and Guarantees". The arbitrators state:
- At this point, it may be important to summarise what was argued before the arbitrators, what they have found and decided, and what can remain at issue on this appeal.
- First, it was and is common ground that the owner, following the GA events and the establishment that the engine breakdown was not its fault (an issue in the arbitration), was entitled to a lien for the GA disbursements concerned. Secondly, it was and is common ground that as a result the owner was entitled to request reasonable security from the consignee as the price of releasing its lien. Thirdly, although the consignee was not obliged to provide such security, it could not complain of the maintenance of the owner's lien if it did not provide what was reasonably requested of it as the price of the lien's release. Fourthly, the consignee provided hardly anything of what was requested of it, and the arbitrators found that the request made was a reasonable and legitimate one in every respect. Fifthly, although the consignee's argument was primarily directed to its cargo as a whole, without differentiation, there was a subsidiary argument (among others to which I have not referred) relating to the 98 coils carried under bill of lading 4, to the effect that in any event to that very minor extent (9% of the total cargo) there was a discharge of the owner's lien by reason of the acceptance of the insurer's guarantee albeit in the absence of any GA bond from the consignee. However, that subsidiary argument was rejected on the basis that the provision of a GA bond in addition to an insurer's guarantee or cash deposit was a standard feature of GA security which a shipowner was entitled to request. Sixthly, even if that last conclusion was in error, there was no fault, breach of contract or conversion on the part of the owner in failing to deliver the 98 coils, because it was impracticable to do so in the circumstances.
- Seventhly, although the arbitrators considered that last question separately, in chapter 14, from the point of view of the situation at Hamina, the earlier findings in chapters 12 and 13 regarding the reasonableness, and indeed necessity, of departing from St Petersburg to Hamina in the first place, demonstrate that at St Petersburg it was impossible to consider the 98 coils separately from the rest of the cargo. For if the vessel had berthed to land the 98 coils, even if that had been practicable, which it may be inferred it would not have been, the vessel would have been forced to discharge and deliver to the consignee the whole of the cargo. Indeed, it does not seem to have been argued or considered that the 98 coils could have been dealt with separately at St Petersburg. Indeed, there is no sign in the award that the consignee in fact sought delivery of the 98 coils at Hamina. Its case appears to have been that the cargo ought to have been delivered at St Petersburg: that neither the expenses of the pirate capture (a point only abandoned at the hearing of the arbitration) or of the ransom nor the towage to Salalah were legitimate GA disbursements, and that if any lien for GA disbursements was available at all, which was in dispute, it was requested in an unreasonable amount to which there was no need to respond. As for the situation at Hamina, moreover, there is no sign of any evidence that there was even any request there for separate delivery of the 98 coils. On the contrary, it was the consignee's position that the diversion to Hamina was totally illegitimate (see chapter 12 cited above). It appears that the position at Hamina was considered simply to deal with the consignee's retrospective forensic argument under a small subsidiary argument.
- It is important to have clarity about the extent to which these conclusions and findings of the arbitrators are legitimately subject to challenge in the court. Question 1 is solely directed to the subsidiary argument referred to in the fifth point listed two paragraphs above. However, the question can only be debated to the extent that the consignee can show as a matter of law, irrespective of the arbitrators' findings of fact, that acceptance of the insurer's guarantee, without the provision of a GA bond, was legally incompatible with the continuation of the owner's lien pro tanto. If to any degree that question of law depends on the arbitrators' view of the facts, such as the reasonableness of the parties' conduct, then the consignee's appeal from the award must fail, for neither the commercial court nor this court can interfere with such findings. If, however, the consignee can show that as a matter of law the owner's lien over the 98 coils was lost, then the sixth point referred to above becomes relevant, and it needs to be asked whether in all the circumstances otherwise found by the arbitrators the owner had illegitimately withheld the 98 coils from the consignee. Again, however, if that question depends to any extent on the facts otherwise found by the arbitrators, the consignee's case under question 1 must fail. However, in any event, it is now common ground that, with the possible exception of the 98 coils in question, the owner was legitimately entitled otherwise to maintain its lien over the cargo, and to do so by taking the cargo to Hamina and discharging it there under lien into storage. All issues at the arbitration as to the legitimacy of leaving St Petersburg and discharging at Hamina (other than as may be bound up in question 1 as to the 98 coils) are no longer live. What remains, however, is whether the owner can recover the Hamina expenses from the consignee, and that is the issue raised by question 2.
- Question 2 was considered by the arbitrators under chapter 15 of their award. They there stated, in addition to their findings under chapter 2 as follows:
- Thus the background to question 2 is as follows. First, the failure to berth and discharge at St Petersburg, and the removal of the cargo to storage at Hamina, were not only a reasonable and legitimate reaction to the failure to discharge the lien over the cargo as a whole, but was considered necessary to avoid the forced discharge of the cargo at St Petersburg and thus the total loss of the owner's lien over that cargo. As I have remarked above, there is no sign in the award that the consignee in fact sought delivery of the 98 coils at Hamina. Secondly, the arbitrators considered that the consignee was liable to pay for the costs at Hamina on three separate bases: (i) to indemnify the owner as a bailee for its reasonable costs in continuing to care for the cargo, under the doctrine of China Pacific v. Food Corporation of India (The Winson) [1982] AC 939; (ii) as damages for breach of the consignee's own obligation as consignee under the bills of lading contracts to take delivery of the cargo; and (iii) as expenses incurred in mitigation of the obligation to pay demurrage and/or damages for detention at St Petersburg. Thirdly, in that last respect, it was common ground that under the terms of the voyage charter incorporated into the bills of lading, demurrage was payable for detention at St Petersburg. Fourthly, the consignee had nevertheless relied on the doctrine of Somes v. British Empire Shipping to the effect that a lienee who exercises a lien does so as a matter of self-help and without being entitled, in the absence of agreement, to charge the lienor with the costs of doing so. In that respect, the entitlement to demurrage or damages for detention under the bills of lading contracts would be relevant as being agreement taking the case outside the doctrine of Somes.
- In respect to the question of demurrage and damages for detention, it is necessary to refer to certain clauses in the voyage charter.
- The charter was to carry 5677 metric tons 5% more or less in charterer's option to one safe berth St Petersburg, cargo to be discharged at "berth no 27". Special clauses were as follows:
- At the arbitration it was common ground that demurrage (or perhaps "detention money" properly so-called) was payable at the discharge port of St Petersburg: see para 15.6 of the award cited above ("MMO accepts that had the Owners exercised their lien off St Petersburg they would have been entitled to demurrage for the time the Ship waited"). It was not argued that, because clause 25 of the charter had stated that cargo was to be discharged "free of risk and expense to the vessel...on customary quick despatch at all ends with no demurrage/no despatch", therefore there was to be no "detention money" for delay because of failure to discharge by reason of the owner's lien for general average. On the contrary it was expressly accepted, as recorded by the arbitrators, that so-called "demurrage" was payable for delay to the vessel had the owner exercised its lien off St Petersburg. On that basis, the arbitrators found that by failing to discharge the lien for GA security, the consignee "is in breach of its contractual obligation to take delivery of the Cargo and is liable to the Owners for the storage costs as damages arising from the breach" and that the Hamina costs "are a substitute expense for damages for detention to which the Owners would have been entitled if the Ship had remained at St Petersburg waiting for MMO to discharge the lien" (at para 15.12).
- The judge, however, was persuaded that the charter's detention money provisions and/or damages for detention did not apply in the present case, despite the concession made at the arbitration. He said, having cited the charter terms:
- I have some difficulty with that reasoning. First, it was conceded at the arbitration that prima facie the charter's demurrage provisions applied to detention of the vessel at St Petersburg by reason of the owner's exercise of its lien. The vessel was delayed for five days at St Petersburg by the consignee's refusal to discharge the owner's lien, before the vessel sailed for Hamina in mitigation of that delay which otherwise might have gone on, as Lord Denning might have said, "until the crack of doom". The arbitrators found that the diversion to Hamina and the storage expenses (some $20,000 per month, see para 15.1 of the award) incurred there were in reasonable mitigation of the losses being incurred at St Petersburg (which the charter consensually estimated at $8,500 per day, or in excess of $250,000 per month). Secondly, the concession that demurrage (or detention money) provisions applied was understandable, whether or not strictly correct (as to which there have been even in this court no detailed submissions, and there was no need for them at the arbitration). Although there was no fixed laytime code and no demurrage stricto sensu payable for the time which the vessel might have taken in discharging after she became an arrived ship ("no demurrage/no despatch"), and no responsibility for congestion, the charterer was nevertheless obliged to discharge the vessel "free of risk and expense to the vessel on customary quick despatch", and was also obliged to facilitate either the arrival of the vessel into berth, or at any rate the commencement of discharge while in berth, by enabling customs clearance and import documentation (see clause 40's "customs/import documents are not in order").
- Arguably, customs clearance and import documentation were not in order where the consignee was not in a position to discharge the owner's lien for general average contribution, and in any event it is at least arguable that a loss of time in getting into berth due to such failure to discharge the lien was to be compensated either as detention money or, outside clause 40, as damages for detention. All such arguments were rendered unnecessary by the consignee's concession at the arbitration. I will refer below to the judge's distinction between demurrage and damages for detention. Thirdly, as to that distinction, although a laytime code leading to demurrage is something worked out in a way in which general damages for detention outside that code are not, nevertheless it has to be remembered that demurrage is only liquidated damages for detaining the vessel longer than the laytime code allows. If the vessel is detained in breach of contract outside the laytime code, it is simply an example of delay to the vessel which has to be compensated to the shipowner in damages for breach which may have to be proved as to causation and quantum. It remains to be considered if the two types of breach for delaying a vessel are in the present context fundamentally different, as the judge said they were.
- The judge answered question 1 in favour of the ship owner, upholding the award and dismissing the consignee's appeal against it. He did so on the basis that it was at least arguable that the insurer's guarantee only operated in conjunction with the consignee's bond and only as guaranteeing the bond provider's liability under its bond. In any event, if a decision on that argument had to be reached, that was the award's finding as to the manner in which guarantee and bond operated together, and that was a finding of mixed fact and law which the court could not go behind (see the award at its para 14.2). On either basis, the owner had acted reasonably, there was no waiver, no unequivocal inconsistency in the owner's conduct, no discharge of the lien pro tanto, and there could be no conversion of the consignee's 98 coils. In the circumstances, he did not need to consider the arbitrators' alternative conclusions that in any event there could be no liability to the consignee in circumstances where (a) it was impractical to separate the 98 coils from the rest of the cargo, and/or (b) any claim by the consignee must fail on the basis of lack of mitigation, viz the costless provision at any time of a bond to supplement the insurer's guarantee.
- On behalf of the consignee, Mr Chirag Karia QC repeated the submissions that he had addressed to the judge. He submitted that the lien in respect of the 98 coils carried under bill of lading 4 had been discharged by the provision and acceptance of the insurer's guarantee to pay any general average contribution ultimately due on that parcel. The lien had been discharged because (i) the guarantee amounted to an agreement between the owner and the insurer to deliver that cargo, (ii) such an agreement was simply inconsistent with the maintenance of a lien, and (iii) in any event the missing GA bond added nothing to the consignee's existing liability under the bill of lading and was a mere "historical relic". The question was not whether the owner had waived its lien pro tanto, or whether its request for a bond as well as a guarantee was reasonable, but whether its acceptance of the insurer's guarantee was simply inconsistent with the maintenance of a lien pro tanto. It was a straightforward question of law, which could not be rested on the basis of mere arguability but had to be resolved, and which could not be avoided on the basis that the arbitrators had decided nothing more than a question of fact (whether or not mixed fact and law). As for the two alternative arguments decided by the arbitrators but left unconsidered by the judge: conversion was a strict tort and there was no defence to it based on practicalities; and as for the purported failure to mitigate, that did not arise because it was the owner's refusal to deliver without security for the whole of the cargo which had caused the loss.
- On behalf of the owner, Ms Claire Blanchard QC submitted that the judge was right for the reasons which he had given. The question of the loss of the lien was a question of waiver, and there could be no waiver where the owner had requested a bond as well as a guarantee. Although an unreasonable request for security to discharge a lien might create its own difficulties, the reasonableness of the owner's request for a bond as well as a guarantee was vindicated by the invariable practice of hundreds of years, as well as by the award's findings. In the circumstances it was unnecessary to prove exactly what the bond added, in practice, to the security of the guarantee: but in any event no shipowner would wish to bring himself into the difficulties of unnecessary legal argument by foregoing a bond. Moreover, the award's findings with respect to the two fall-back arguments were unanswerable on the findings of the award.
- The law relating to a shipowner's lien for general average disbursements may for present purposes be stated as follows. Cargo's liability to contribute, and the shipowner's lien, arise at the time of the general average sacrifice or disbursement. The liability falls on whomever at that time is the owner of the cargo. It is an in personam liability, albeit the lien of course attaches to the cargo in question. The cause of action and the running of time commence at the moment of the general average incident. However, because it typically takes a considerable time for average adjusters to complete an adjustment, setting out the respective contributing liabilities of the various parties to the adventure, and because even the adjustment is not binding on the parties, but may be challenged in court or arbitration, the practice has grown up and is already hundreds of years old for the shipowner to take security for what it is reasonably estimated may be owed to it and/or the other parties to the adventure. That security has typically been in the form of an average bond taken from the consignee of the cargo, backed up by a guarantee from the cargo's insurer or a cash deposit. The consignee, who may very well not be the same as the owner of the cargo at the time of the general average incident (and that person may be hard to identify) will provide that security or obtain it from the insurer of his cargo, because he wants his cargo delivered, and without satisfying the shipowner with adequate security, he cannot obtain his cargo. The bond and/or guarantee represent new contracts, which may contain their own law and jurisdiction clauses, and new causes of action, against new parties, come into existence based upon them. Limitation begins anew, either from the time of the bond or guarantee, or, as the bond and guarantee regularly state, from the time of the published adjustment (or the adjusters' certificate for an interim payment, where that is provided for). The shipowner is not only interested in protecting his own position, but is obligated to all contributing parties to protect their positions too, because in theory they or some of them may be owed by other parties to the adventure more than they are liable to contribute themselves.
- Much of this law has been conveniently restated in Castle Insurance Co Ltd v. Hong Kong Islands Shipping Co Ltd (The Potoi Chau) [1984] 1 AC 226 (PC), where Lord Diplock said this:
- Lord Diplock then went on to set out the terms of the average bonds in use in that case. He said (at 238/9):
- Lord Diplock then turned his attention to the insurer's guarantee. There were in various forms, which are set out at 228D-G. The second form there set out is materially identical to the insurer's guarantee issued in respect of the 98 coils. Lord Diplock explained (at 241/2):
- See also Crooks & Co v. Allan (1879) 5 QBD 38 at 41/2, Christian B Svendsen v. Wallace Brothers (1885) 10 App Cas 404 at 410, Huth & Co v. Lamport (1886) LR 16 QBD 735 (CA), and Tate & Lyle Ltd v. Hain Steamship Company Ltd (1934) 49 Ll L Rep 123 (CA, where Greer LJ's dissenting judgment was subsequently upheld in the House of Lords) and (1936) 55 Ll L Rep 159 (HL).
- Now in the present case it may be noted that the average bond and average guarantee requested did not in terms promise delivery by the owner. The critical words in each are "In consideration of the delivery to us or to our order" (the bond), and "In consideration of the delivery in due course" (the guarantee), of the specified cargo. Thus the delivery becomes the actual consideration given by the owner for the promise given by the consignee or insurer. Where the guarantee is given, the consideration is the delivery of the cargo "without collection of a deposit". Thus the insurer's guarantee in this case was not in the terms of the average bond given by the consignee in The Potoi Chau, which expressly stated that the shipowner there "will deliver" the cargo in question.
- Mr Karia nevertheless submits that the acceptance of the insurer's guarantee for the 98 coils, even in the absence of a bond from the consignee, discharges the owner's lien pro tanto. He can cite no authority to that effect. On the contrary, the authorities illustrate how the average bond supported by additional security, either in the form of a guarantee from insurers or in the form of a cash deposit, is the typical and long standing means by which a shipowner is entitled to stipulate for the terms on which he will be willing to forego his lien. Whereas the long standing practice illustrates that the bond may not necessarily be accompanied by a guarantee, for a cash deposit is an alternative to that, there is nothing in the authorities to suggest that a guarantee without a bond is sufficient, or that to require a bond in addition to a guarantee is unreasonable. After all, the bond is a new contract, with a new party, with a new and delayed period of limitation, with possibly additional terms dealing with law and jurisdiction and the payment of interim certificated amounts on account. Provided the request is reasonable, the shipowner is entitled to make his own terms if he is to forego immediate payment or release his lien. Where a shipowner requests both bond and insurer's guarantee, it seems hard to imagine that the law will insist that the provision of the guarantee but the refusal of a bond will nevertheless amount to a waiver or automatic discharge of the lien.
- Mr Karia submits, however, that the bond adds nothing to the guarantee and is a mere historical relic. He observes that the consignee, by presenting bills of lading to request delivery, becomes bound by their terms to pay general average (see clause 3 of the bills) and/or that the law imposes such liability on him through section 3(1)(a) of the Carriage of Goods by Sea Act 1992. Therefore there was no need for a bond to make the consignee liable, in addition to the cargo owner at the time of the general average sacrifice or expenditure, for payment of the general average contribution due in respect of the cargo in question. He also submits, by reference to a series of cases about solicitor's liens and the manner in which they may be lost, that the test of such loss is the purely objective test of inconsistency or incompatibility, and that the acceptance and retention of the guarantee is simply incompatible with the maintenance of the lien with respect to the 98 coils. He submits that the arbitrators and judge were wrong, in the light of Lord Diplock's observations in The Potoi Chau about the nature of an insurer's primary liability under its average guarantee, to suggest as arguable, let alone to hold, that the effectiveness of the guarantee was contingent on the consignee's liability under a bond (even if that were necessary as an additional support to its liability derived otherwise). That holding was wrong in law and could not be supported as a mixed finding of law and fact.
- In my judgment, however, these submissions fail. On the facts the owner was clearly unwilling to give up its lien in the absence of a bond from the consignee in addition to an insurer's guarantee or cash deposit. In the light of the authorities, long standing practice, and the arbitrators' findings, the owner was equally clearly fully entitled to take up that position, which was found to be reasonable in every respect. It may be perfectly true that, in the circumstances, by the time, whenever that was, that the bills came into the consignee's hands, and the consignee presented them to the owner, a bond might not have added in any practical way to the sources of its liability to the owner. However, the very refusal by the consignee to provide its bond would have given the owner pause for thought, and in my judgment rightly so. In any event, the bond would probably have clarified the consignee's liability very helpfully. Moreover, it would have postponed the running of the limitation period considerably, which in the context of the lengthy delays which can overtake the settlement of a general average adjustment can be of substantial importance (as the facts of The Potoi Chau illustrate). There were other advantages which the bond would have given, such as the right to a payment on account. In my judgment, the clarity and certainty of the obligations undertaken by the consignee under the bond are a sufficient justification, were any needed, for the owner's continuing request for one.
- I say that on the assumption, which I am prepared to make in the light of The Potoi Chau, that the insurer's guarantee may well have been sufficient security on its own without the presence of any additional liability on the part of the consignee, whether derived from an average bond or from the bills of lading. I am willing to make that assumption despite the arbitrators' and the judge's views that the guarantee was conditional on the consignee's liability, and I am prepared to assume that those views were mistaken. Nevertheless, it is still impossible to my mind to say that the owner is not entitled to the clear, and clearly stated, undertaking of the consignee in addition. The consignee is the party most interested in the delivery of the goods and it is only fitting that it should be primarily responsible for any general average contribution. Although the insurer ought to be creditworthy, not all insurers turn out to be so, and the clearly accepted liability of the consignee is something to which history obviously accords proper regard: and I can see no reason why history should be discarded.
- It follows, as stated (at para [19] above) that the consignee's argument on question 1 could only succeed, if it can succeed at all, if the law absolutely required that a shipowner who had (reasonably, as I am bound to allow) requested both a bond and a guarantee (or a cash deposit), but had received only the insurer's guarantee found in this case, must be regarded as having foregone his lien, possibly because such a guarantee had not been returned after it had become obvious that the consignee's bond, which the award relates the owner continued to press for, was not going to be forthcoming. However, there is no authority of any relevance which begins to make good such a conclusion.
- Mr Karia referred to certain authorities on the loss of solicitors' liens. I do not derive great assistance from them. They emphasise that so much depends on the circumstances of each case. In any event the position of a solicitor's lien is affected by the obligation of the solicitor to explain matters to his client. This is not a helpful paradigm for the commercial world of shipowners and consignees where they have to deal with the consequences of general average misfortunes.
- Thus Robarts v. Jefferys (1830) 8 LJ (OS) Ch 137 decided that a solicitor who takes a promissory note for his costs payable on demand loses (waives) his lien. The judgment demonstrates an inconclusive discussion of whether then existing jurisprudence on the subject turned on the giving of time to pay (at 140). Following that inconclusive discussion, however, the decision in that case was rendered on the basis that the promissory note required the payment of interest on a liability in costs which did not carry interest. It was asserted that that was a "waiver of his lien", but it is not at all clear why that should be and no reason was given (ibid). In re Taylor, Stileman & Underwood [1891] 1 Ch 590 (CA) was another case about such a promissory note given as security for a solicitor's costs: the decision in Robarts v. Jefferys was followed, but only on the rationale that the case of a solicitor was special. Lindley LJ said (at 597):
- In Mason v. Morley (No 1) (1865) 34 Beav 471, 55 ER 717, Sir John Romilly MR said waiver was inferred from the deliberate selection by the solicitor of certain deeds over which a lien was to be maintained for the future, in substitution for a general lien over all the deeds of a testator. This was understandably regarded as an abandonment of any lien over the remainder of the deeds. It throws no light whatsoever over the circumstances of our case, where the matter proceeded on the clear understanding that security was required for the whole of the cargo of steel coils and the consignee was willing to provide none, other than the insurer's guarantee for 9% of the cargo.
- More recently, the question of a solicitor's lien was considered by Mr Christopher Nugee QC sitting as a deputy judge of the High Court in Clifford Harris & Co v. Solland International Ltd [2005] EWHC 141 (Ch), [2005] 2 All ER 334. The nub of his analysis is in paras [38] – [40] where he explains, on the basis of Re Taylor but also subsequent authorities, that even a solicitor, with the duty he owes to explain matters to his client, will not be taken to have waived his lien unless he has done something inconsistent with it; that an inconsistency will, however, be more readily found in the case of a solicitor because of that duty owed to his client; that the test of waiver is objective; and that such objectivity allowed for the position where both parties positively intend that existing rights will be unaffected by the taking of security or where it is made plain that the rights of lien are reserved.
- In the present case, however, it seems to me to be plain, on an objective evaluation of the facts as found by the arbitrators, that the owner had made it clear to the consignee that it was not willing to discharge the cargo, in other words was maintaining its lien, unless the consignee provided security for all the cargo, which involved providing both a bond and a guarantee or cash deposit for every bit of the cargo. The consignee plainly knew that this was the case, but for unfathomable reasons declined to meet the owner's request. It had every opportunity to do so. This was as far from the situation of a solicitor and his client as it is possible to be. It seems to me impossible in such circumstances to infer, on any objective commercial basis, that there had been any waiver of the owner's lien, or that the owner had acted inconsistently with its lien. Even if the 98 coils had to be considered entirely separately, because they were carried under a separate bill of lading, the owner's request for a bond and an insurer's guarantee was not met. However, it seems to me that the 98 coils could not be considered separately. The owner was quite understandably and wholly reasonably not willing to treat parts of a single consignee's uniform cargo separately. The requested bond referred to all four bills of lading and to the complete cargo. In sum, there was on any view no inconsistency and no waiver.
- For these purposes, it is unnecessary to rest any part of the reasoning on the fact that the viability of the insurer's guarantee standing by itself may have been arguably uncertain. That may in other circumstances go to the reasonableness of a shipowner's demands, but that is not in issue on this appeal. It is also unnecessary to rest any part of my reasoning on the judge's view that the question of the meaning of the insurer's guarantee was ultimately a finding of fact on which the court would not disturb the arbitrators' conclusion. I have been prepared to assume that the arbitrators and the judge were wrong in their construction of the guarantee.
- It is also unnecessary to deal with the two alternative bases on which the arbitrators decided the issue of the consignee's counterclaim for damages for conversion of the 98 coils. However, I would express the tentative opinion, tentative because the matter was not much investigated during the argument of this appeal, that the practical difficulties of delivering the 98 coils either at St Petersburg (if that was relevant to the argument raised by the consignee at the arbitration) or at Hamina may well have been a defence to the tort of conversion.
- It is true that in many respects the tort may be described as a strict one (see, for instance, Motis Exports Ltd v. Dampskibselskabet AF 1912 Aktieselskab [2000] 1 Lloyd's Rep 211 (CA), where the shipowner delivered goods on production of a forged bill of lading, in ignorance of the forgery). Thus Clerk & Lindsell, 20th ed, at para 17-71 states: "A defendant deals with others' goods at his peril: unless he can invoke some specific defence he is potentially liable, however reasonable or well-intentioned his action"; and at para 17-72 states: "On principle a defendant is liable in conversion whether or not he knew, or had reason to know, that what he was doing infringed the claimant's rights". However, para 17-74 states that there are a considerable number of exceptions to those principles; and para 17-75 distinguishes between a conversion and "a possession or detention which is a mere custody or mere asportation made without reference to the question of the property in goods or chattels" (citing Fowler v. Hollins (1872) LR 7 QB 616 at 630 per Brett J). It is not clear to me that the impracticalities of separating 9% of a cargo from the properly liened remaining 91%, in circumstances where the owner is perfectly willing otherwise to recognise the consignee's title, is a conversion.
- In any event, I see no answer, and certainly none in Mr Karia's submission stated above, to the arbitrators' finding (at para 1.15(9) of the award) that the consignee had failed to mitigate any loss caused by the detention of the 98 coils. It is impossible to accept Mr Karia's submission that the true cause of loss was the owner's legitimate demand for security covering the whole cargo, as distinct from the consignee's unfathomable refusal to provide security for its liability to make contribution in general average.
- I would therefore answer question 1 by saying that the owner was entitled to refuse to deliver the 98 coils out of the larger cargo of 1089 coils, despite receiving and retaining the insurer's guarantee covering the general average liability in respect of those 98 coils; and that even if it was not so entitled, there are no damages payable to the consignee.
- The judge applied Somes v. British Empire Shipping Co (1858) El Bl & El 353 (QB), (1859) El Bl & El 367 (Exch Ch), (1860) 8 HL Cas 338, 11 ER 459 (HL) for the common law principle that the exercise of a lien cannot give rise to a claim by the lienee for the expenses resulting from such a remedy of self-help. He considered that the Somes principle was applicable to the case of a shipowner's lien. He referred also to The Katingaki [1976] 2 Lloyd's Rep 372 (Brandon J), The Winson [1982] AC 939 (HL), and Morris v. Beaconsfield Motors [2001] EWCA Civ 1322, as well as to text-book and treatise writers, as supporting the Somes principle.
- Furthermore, the judge rejected all attempts made on behalf of the owner to distinguish Somes by reference to shipping cases which might appear to allow a shipowner to recover expenditure incurred for the preservation of cargo, either on the ground that such cases were concerned with involuntary possession as distinct from possession retained by reason of a lien, or, where a shipowner did enforce a lien, on the ground that the shipping contract there allowed for demurrage: see, for instance, Lyle Shipping Co v. Corporation of Cardiff (1899) Com Cas 87 (Bigham J) and Rashtriya Chemicals and Fertilisers Ltd v. Huddart Parker Industries Ltd (The Boral Gas) [1988] 1 Lloyd's Rep 342 (Evans J). He regarded the award as being premised, in part, on the availability of damages for detention, as distinct from demurrage, but he distinguished the two concepts as being fundamentally different for the purposes of the Somes principle. In effect, he regarded a laytime code, resulting in demurrage, as imposing a contractual regime requiring the cargo interest to pay for delay despite the exercise of a lien; whereas he regarded damages for detention, or any claim for damages based on cargo's failure to take delivery by reason of its refusal to discharge the lien, as an unsuccessful attempt to evade the Somes principle.
- Much of the essence of the judge's reasoning along these lines is contained in the following passages of his judgment:
- The essence of the judge's reasoning, in sum, is that the principle in Somes is an overriding principle of law, applicable in all circumstances where a lienee exercises a lien and thus also applicable to a shipowner's lien and to a lien for general average contribution. The parties' contract may provide otherwise, and is allowed to do so where there are laytime provisions providing for demurrage payable for delay in discharging; and it may also do so, perhaps, where there is some breach of contract other than the non-payment which gives rise to the shipowner's lien. However, a consignee's obligations to take delivery of cargo and thus not to prevent a vessel becoming an arrived ship are not such obligations: because the law deems the real cause of the delay and failure to deliver the cargo as not being the failure to discharge the lien, or the consequent failure to allow the ship to arrive and deliver its cargo, but the shipowner's exercise of self help. Moreover, that self help involved in exercising a lien is deemed to be solely for the shipowner's own benefit and not otherwise. The Somes principle in other words is all embracing – subject only to laytime provisions.
- On this appeal the parties' submissions have broadly tracked their submissions below. Ms Blanchard submits that the judge has overstated the importance of the Somes principle. It is a narrow principle, which has not been applied in contract of carriage cases and in particular not in shipping cases, which have developed their own principles. For instance, a consignee's obligation to take delivery of his cargo, and thus not to prevent a vessel becoming an arrived ship so that delivery can be made, trumps the Somes principle, because it is well recognised that the obligation to take delivery includes doing whatever is necessary to qualify for delivery. Laytime and demurrage provisions are examples of the express provision for liquidated damages for breach of the obligation to discharge cargo timeously: but there is no such critical distinction between demurrage and damages for detention or delay as the judge ruled. If it were otherwise, the Somes principle would have been seen constantly at work in shipping cases, which it has not. In any event, the judge was not entitled to ride roughshod over the arbitrators' findings. The arbitrators found that demurrage (which was conceded to apply for the time while the ship waited off St Petersburg) and/or damages for detention were payable. They likewise found that the consignee was in breach of contract in failing to take delivery of the cargo or liable in bailment for the consequences of not doing so. They likewise found that the consignee derived a benefit from the owner's storage of the cargo at Hamina.
- Ms Blanchard also submitted that, although before the judge this question 2 was argued broadly, there was in truth no entitlement to debate the findings of fact which the arbitrators had made. The only proper subject of appeal under question 2 (for which permission was given by Andrew Smith J on paper) was whether the Somes principle trumps all. It was in any event improper to overlook the concession made at the arbitration as to the applicability of voyage charter demurrage (detention money) to delay while the vessel remained at St Petersburg.
- On behalf of the consignee, Mr Karia submitted that the judge was right for the reasons which he had given. He explained the shipping cases, as the judge had done, as ones where no lien was exercised but the shipowner had to deal with cargo which had been imposed on him as an involuntary bailee, or else as cases in which demurrage provisions applied. He accepted the burden, indeed it was his own submission, that "my case stands or falls on Somes".
- It will be necessary to evaluate these submissions in the light of the jurisprudence. In my judgment, there might have been debate as to the width of question 2, but as it was the parties argued it before the judge broadly. Even so, it seems to me that the consignee does indeed bear the burden on appeal from the arbitrators' award to show that their conclusions, including their findings of fact, were legally impossible conclusions in the light of Somes. Mr Karia has not shirked that burden.
- I shall consider the jurisprudence in two stages. First I will consider Somes and the Somes principle where it has been applied. Secondly, I will consider the shipping cases where Somes has not been applied. I will then seek to come to my conclusions.
- In Somes a shipowner put its ship (the British Empire) into repair at Messrs Somes' shipyard at Blackwall. The repairs were extensive, costing nearly Ł9,000. One item in the specification and estimate of repairs which preceded the work being done was "The cost of use of graving dock for the job will be from 120 to 150 guineas". The figure of Ł150 was subsequently charged and not disputed. After the repairs were done and the account sent in, there was delay in payment. On 25 November 1856 Messrs Somes wrote a letter saying they would charge Ł21 a day hire for the occupation of their dry dock. On 27 November the shipowner's lawyers protested and threatened to claim damages for the detention of the ship. Ultimately the shipowner paid the account demanded under protest, and sued to recover a sum of Ł567 charged for dock dues from 27 November to 29 December. The ship was actually taken back by the shipowner on 24 December. All three courts which heard the claim decided it in favour of the shipowner.
- In the court of Queen's Bench, judgment was given by Lord Campbell CJ ((1858) El Bl & El 353). Messrs Somes were regarded as artificers who had exercised an artificer's lien. It was stated that "There is no evidence of any special contract for such a payment", ie for the use of the dock while the ship was detained under lien. However, Lord Campbell contrasted the case with that of a wharfinger. He said (at 365-366):
- I observe: the lien was treated as an artificer's lien, and that is contrasted with a wharfinger's lien; it was plainly considered that there was no contract for a payment for the use of the dry dock (no reference was made by Lord Campbell to the item of cost for dock dues[2]); the analogy was made with the cost of keeping distrained animals; there was no suggestion that the shipowner was under any contractual obligation to remove his ship from the dock at the completion of repairs.
- There was an appeal to the Exchequer Chamber ((1859) El Bl & El 367). Mr Blackburn for the shipowner was not even called upon. Cockburn CJ said:
- In the House of Lords ((1860) 8 HL Cas 338) the appellant's case turned exclusively on the argument that a contract to pay dock dues during the period after the completion of repairs could be inferred ("It was a reasonable inference of fact that there was to be a payment for the use of the dock as long as the ship remained there"). However, Lord Wensleydale arguendo put the case of a typical artificer: "If a tailor makes a suit of clothes, the customer is to pay for them; but suppose he does not pay, and the tailor keeps them in the shop, is the customer to pay for their being kept there?"[3] Moreover, the point of whether there was a contractual obligation to pay dock dues while the ship remained in dock seems to have been confused and overlaid with the separate point of whether there was a contract for a lien for such dock dues. Thus Lord Cranworth said (at 343):
- Lord Cranworth then said that such a contract might have been created if, after the repairs had been completed, Messrs Somes had said that the ship was encumbering their dock and should be removed (sc on payment of their bill, for otherwise there could have been no question of a lien at all). He continued:
- If I may respectfully say so, I do not think that Lord Cranworth's judgment grasped Messrs Somes' critical argument, which was that there was a prior contract which incorporated a requirement of payment for use of the dock.
- Lord Wensleydale, however, did grasp this issue. Having said that the common law gave "no person…a right to add to his lien upon a chattel a charge for keeping it till the debt be paid; that is, in truth, a charge for keeping it for his own benefit, not for the benefit of the person whose chattel is in his possession", he continued:
- Lord Chelmsford "entirely agreed".
- I observe: (i) from beginning to end, the lien in question is a common law artificer's lien, which is contrasted with other kinds of lien, such as a wharfinger's; (ii) the essence of an artificer's lien is that he has a lien for his work and nothing more; (iii) nothing whatsoever is said of the position of contracts of carriage or of the position of shipowners and consignees; (iv) the nature of an artificer's lien at common law is explained by the analogy of distraint of animals, which is as far away from the mercantile nature of contracts of carriage by sea as it is possible to be; (v) although the repair of ships is of course a matter of serious business, nevertheless the analogy remained that of distraint of animals, or of the tailor, and it will be necessary to consider how helpful those analogies are to the problem faced in the present case; (vi) even in the context of an artificer's lien, all the courts considered that the common law position could be altered by contract, and that the contractual position might be regulated by commercial usage which could generate an inference that expenses involved in storage of the liened chattel could be recovered from the lienor; (vii) in particular the judges contemplated that a contract whereby the lienor was required to pay for the use of the lienee's premises would alter the common law position; (viii) ultimately, therefore, the House of Lords' decision was a decision, at any rate by Lord Wensleydale, on the particular facts of that case, and on those facts the decision was that there was never any agreement for the cost of the drydock; (ix) it is plain that on the facts the shipowner was not regarded as being under any obligation whatsoever to remove his ship from the dock at any time: there is no suggestion of such an obligation, on the contrary, Lord Cranworth contemplates that, in the absence of any prior contractual stipulation, a demand post the completion of repairs requiring the shipowner to remove his ship within a reasonable time could perhaps have set up a claim to pay a reasonable sum for improperly leaving the ship for an unreasonable time; (x) plainly, in this context, the analogy of the tailor is dominant, wherein there is no obligation to remove the finished garment at any time; (xi) the judges were influenced by the absence of precedent in the case of the artificer (by contrast with the case of the wharfinger) but Cockburn CJ in the Court of Exchequer recognised that a different rule might be "beneficial": in this connection there is no discussion of what the utility of a lien is if possession is disastrous for the lienee, but it was possibly this contemplation that led Lord Cranworth to speculate on the possibility of the lienee being able to impose a reasonable time for collection after which the lienor may find himself under an obligation; (xii) the analysis in the House of Lords is generally unhelpful, if I may make so bold to say, since Lord Cranworth analyses the matter as depending on a contract for a lien for dock dues, and only Lord Wensleydale defines the matter as depending on a contract for the payment of dock dues, and Lord Chelmsford appears to agree with both; (xiii) one element in the analysis is that Messrs Somes' artificer's lien is a matter of pure self help, which on the facts of that case was of benefit only to the lienee: however, that might not necessarily be the case in other situations where the chattel owner may need the lienee to look after his chattel while he defaults on his contractual obligations, and where the lienee is assisting the lienor as much as himself.
- In sum, the rule is that the common law, in the absence of contract, does not attach a right to claim the expenses of exercising an artificer's lien to the right of such a lien: but that such a right may well arise from contract.
- That does not seem to me like a mighty principle of the law, however useful it may be to know it: especially since liens come in many shapes and forms (and may not all reflect the artificer's lien), and in any event often arise in a contractual context, so that the ultimate question of remedies will nearly always depend on the particular facts of the individual case since they will depend on the contract which the parties have entered into.
- It remains to be seen how influential the Somes principle has been in the last 150 years. Mr Karia has cited very few cases as turning on it, and it is to those to which I now turn. In doing so, I will postpone dealing with The Winson (a decision of 1981), on which the judge and Mr Karia relied, until it takes its place within the run of shipping cases generally, for there Lord Diplock referred to Somes only in an obiter aside and did not apply it.
- Somes was cited to the court, but not by the court, in The Thames Iron Works Company v. The Patent Derrick Company (1860) 1 J & H 93, a decision of Sir Page Wood V-C. A shipyard built a ship and the outstanding account was made the subject of a judgment, which remained unpaid. The shipyard wished to sell the ship as a remedy given as part of its lien, since the retention of the ship was causing great expense, but the court was unable to sanction it. Wood V-C said that "It has been settled by numerous authorities that such a lien does not, in general, authorise a sale", but he allowed that "whatever the law might be" it was common to find "advertisements threatening to sell horses or other chattels, unless removed by a given date". He also said that a case put by Story, of notice being given that expense is being incurred and that if the chattel were not removed it would be sold[4], did not there arise. But "If it did, it would be necessary to analyse the right of lien, and consider whether it amounts to anything more than this – that a person who chooses to insist on the right of retainer which the law gives, and is willing to put up with any inconvenience which may be the consequence, is at liberty to do so, but has no further right."
- Bruce v. Everson (1883) Cab & El 18 concerned a furniture repairer, another artificer. There was a straightforward application of Somes, and the artificer failed in his counterclaim for storage expenses.
- After that, it seems that one has to wait until The Katingaki in 1976, a decision of Brandon J, for the next application of the Somes principle cited in these proceedings. That was a case similar to Somes, in that it concerned an artificer's lien for the amount due for the repairs to a ship. The ship had been arrested, and its owners sought release from arrest by paying the shipyard's disputed claim for the repairs into court. Brandon J directed payment into court of the Ł17,000 odd in dispute on the repairs (claim 1): but he summarily dismissed two further claims (claims 2 and 3), which were for damages arising out of the ship's occupation of the shipyard after the completion of repairs. Claim 3 was dismissed on the ground that it rested on a lien for damages, and Brandon J said that there was no lien for damages (an application, I suppose, of Lord Cranworth's analysis). Claim 2 rested on an implied term that the shipowner would pay dock dues for any period for which the ship would remain in dock after the completion of repairs, and Brandon J declined to find such an implied term as arguable (another example, I suppose, of Lord Wensleydale's analysis). As to this aspect of the case, Brandon J said that a similar argument had failed "on the facts" in Somes and continued (at 376):
- The Somes principle itself, stated to be that the common law remedy of an artificer's lien did not bring with itself a right of lien for the cost of exercising the lien, was not in dispute (at 375). It is interesting that this was the principle for which Brandon J recognised Somes. He expressed the principle in these words which he took from the side-note in the report of the House of Lords judgment in Somes:
- The next case cited as an application of Somes is the unreported decision of a two judge court of appeal in a case where litigants in person appeared on both sides of the appeal: Morris v. Beaconsfield Motors [2001] EWCA Civ 1322. This also concerned an artificer's lien, namely a contract for the repair of an Alvis motorcar. The judgment of Pill LJ records that the car was delivered to the mechanic in 1977 and the work was completed in 1998, but whether or not that reference to 1977 was intended as a reference to 1997 I know not, but I suspect it was. At any rate a price of Ł1000 was quoted for the work, and an additional Ł600 was agreed for an MOT. When the work was completed, the car-owner paid only certain sums on account, and he also sold another car to the mechanic in part payment, but the total bill was not met. The Alvis remained with the mechanic meanwhile. Ultimately the mechanic sent a notice pursuant to the Tort (Interference with Goods) Act 1977 proposing to sell the car. Meanwhile the mechanic paid Ł105 to the Revenue to retain the cherished number plate number on the car. In 1999 the car-owner surfaced to commence proceedings to halt the sale and recover the car. The district judge gave judgment for the outstanding amount of the repairs (Ł623.30), for the Ł105, and "Ł3,216 damages in respect of storage" from the date of the 1977 Act notice, and for sale of the car if the judgment debt was not met by a certain date. Pill LJ said that that judgment was one the district judge was entitled to make, subject to an issue regarding the storage charges. As it was, before the appeal was heard, the car was sold (for Ł500).
- Pill LJ referred to "a general principle of law that a worker asserting a right of lien is not generally able to charge storage of the article upon which the lien is asserted" and cited Chitty on Contracts, 28th ed, at para 33-087 for the propositions inter alia that "The lien covers the sum due for materials supplied and work performed on the chattel but not charges for warehousing or storage even during the period of the lien. There is no lien in common law for the maintenance of the chattel in its original condition without improvement".[5] Pill LJ also referred to Somes (and The Winson). The facts of the case were not clear to the court, but Pill LJ leaned to the conclusion that the mechanic had exercised a lien and that no other considerations applied. Thus the district judge's judgment for the storage charges was set aside. However, judgment for the Ł105 remained: "because it was to the eventual benefit of the lienor, the expenditure of Ł105 was justified as a way of preserving the asset" (at para [28]). Rimer J gave a short judgment in agreement.
- I do not find this case of great assistance. It was a typical case of an artificer's lien, not dissimilar from Lord Wensleydale's example of a tailor. The storage charges, charged at over Ł3,000 and far exceeding the value of the work agreed, illustrate the dangers of artificers surprising their clients with uncovenanted extras. On the other hand, the storage charges only related to the period after the delivery of the 1977 Act notice, and Lord Cranworth had himself contemplated that a charge might perhaps be imposed by contract in circumstances where a formal notice to (pay and) remove the car within a reasonable time had been given. Not surprisingly, however, there was no sophistication in the argument of the appeal. The Ł105 item which was allowed raises as many questions as the storage charges which were not. Mr Karia submitted that the Ł105 was allowed because it was an improvement. That is not, however, what Pill LJ said: he said it was a benefit because it was "a way of preserving the asset". Looking at the matter pragmatically, I see that the Ł105 was a reasonable sum, which was paid to the Revenue, so that the artificer was clearly out of pocket to that extent; whereas the storage charges were very large, went entirely into the pocket of the mechanic, and effectively sought to constitute the mechanic the operator of a parking business on top of his work as a mechanic. It is not perhaps surprising in the circumstances that this court did not provide much explanation by way of principle. However, generally speaking, if the Ł105 was of benefit to the owner, I do not see why the parking was not of similar benefit (even if charged rather dearly).
- Finally, Mr Karia cites T Comedy (UK) Ltd v. Easy Managed Transport Ltd [2007] EWHC 611 (Comm), [2007] 2 Lloyd's Rep 397 (Jonathan Hirst QC, sitting as a deputy high court judge). That concerned carriage of goods by road and is the only case cited applying Somes outside the context of an artificer's lien. (It was cited to Popplewell J, at any rate on paper, but he does not refer to it.) The carrier exercised a particular contractual lien for storage under RHA conditions. The storage occurred at the end of the carriage, and there were separate RHA conditions for both carriage and storage. The carriage conditions were held to be inapplicable as inconsistent with CMR, and "That leaves the particular lien under the RHA conditions for storage" (at para [61]). In disallowing this claim, Mr Hirst QC merely said:
- I am afraid, with respect to Mr Hirst, that I do not understand the situation. The storage charges could only apply once the carriage was over, for CMR prevailed over the contract of carriage (at para [31]). If the storage conditions imposed storage charges (and I find it difficult to believe that storage came free in this context), then I do not know how anything in Somes can affect the matter. The storage conditions plainly gave a lien for storage charges. I am not sure what the storage charges claim was, but I suspect not very much (the lien, over garments, was exercised for only something like two weeks). The real bone of contention was that the carrier had wrongly purported to exercise a general lien for something like Ł86,000 over the outstanding account of the parties involved, and this was something the carrier was not entitled to do. If therefore the lien in question which was exercised was not for the storage charges but for the general outstanding account, and if such a lien was wrongful, then of course the carrier could not claim for storage while the garments were detained.
- In any event, Somes is only concerned with a common law lien, and Mr Hirst is discussing a contractual lien for storage charges. It is not clear to me that the limitations of the common law (artificer's) lien throws a great deal of light on the interpretation of a contract which provides for both storage charges and for a lien for them. I may have missed something important about this case, but I regret to say that I am not assisted by it.
- These are the only authorities which have been brought to our attention for the application of the Somes principle.
- However, it is convenient to mention here a case to be found in our bundles but not cited to us at the hearing, where Somes was relied upon by the bailor in a warehousing context and where the comments of MacKinnon J were very much in line with what I have just said above concerning T Comedy. That is the case of Vacha v. Gillett (1934) 50 Ll Rep 67 ("a case of repulsive complexity" at 68). MacKinnon J concluded as follows (at 76):
- The judge cited a number of treatises (at his para [65]), but in my view his abbreviated extracts do not encapsulate the problem in this appeal. As an introduction to the shipping jurisprudence which I will consider next, I cite longer extracts from the two most relevant treatises, namely Lowndes and Rudolf, The Law of General Average, 13th ed, 2008 at para 30.44, and Cooke et al, Voyage Charters, 3rd ed, 2007, para 17.37.
- Lowndes and Rudolf says this:
- Cooke et al on Voyage Charters at para 17.37 says this:
- That passage sets up the argument in this litigation in a nutshell, and I am grateful for it. I will consider the shipping jurisprudence on which it is based below.
- In concluding this passage of my judgment, it is relevant to ask, what is the Somes principle? In my judgment, there are two principles, but no authority has been cited to me that they are of general application outside the case of the artificer's lien. The first is that the common law remedy of an artificer's lien does not attach to it (or contain within it) a right of claim to the expenses of enforcing or exercising it. It follows that if such expenses are to be claimed they have to be found either in contractual provision or in damages for breach of contract. The second is that there is no lien for such expenses, unless contract provides for one. That second rule must in any event follow from the first. Whereas Somes is authority for these principles, the rationale for them is somewhat uncertain, other than the absence of prior authority for them. In any event, Somes cannot be regarded as any real authority as to how a contract is to be interpreted, that is a matter of general law and contract interpretation. Moreover, there was no discussion in Somes as to what the consequence of the customer lienor's breach of contract might be. That is a real defect in its rationality.
- I turn to the shipping cases.
- The earliest case cited is Black v. Rose (1864) 2 Moore NS 277 (PC), an appeal in the Privy Council from the Supreme Court of Ceylon. A charter provided for discharge of the cargo "free of risk and expense to the ship". There were also provisions for demurrage. A dispute as to the payment of freight led to the master exercising a lien during discharge. The claimant charterer disputed the lien, the shipowner cross-claimed for demurrage. The shipowner succeeded on both counts. The Supreme Court said: "As we hold that the Merchant's refusal to pay freight on delivery was wrongful, we must hold that his omission to unload and receive the cargo on the proper terms was wrongful also, and that the part of the judgment which fixes him with demurrage is correct" (at 286). The Privy Council affirmed without calling on the respondent (at 288). It seemed as natural to the courts as it could be that a party who was responsible for discharging promptly subject to a lien for freight could not complain about having to pay for the time lost through exercise of the lien: for the fault, the breach of contract, was on the side of the charterer. Mr Karia says that this turns entirely on the fact that the breach of contract sounded in demurrage, rather than damages under some other name: but there is no sign whatsoever that this is the rationale of the decision. The case came to the Privy Council only a few years after the decisions in Somes, which does not appear to have been considered at all.
- Ford v. Cotesworth (1868) LR 4 QB 127 is in our bundles, because it is the famous case which affirms that there is no magic in a laytime code or in the term "demurrage". If the contract is silent as to the time to be occupied in discharge, the term to be implied, as normal, is that discharge has to be done "within a reasonable time under the circumstances" (at 133). For breach of such a term, damages are payable.
- The Merchant Shipping Act 1862 remedied one of the defects of a lien for freight, which was that if possession was lost on discharge into a warehouse, then the lien was lost. The MSA 1862 permitted discharge into statutory warehouses under a retained lien for freight. What however was to happen abroad? Mors-le-Blanch v. Wilson (1873) LR 8 CP 227 decided that, at any rate if the master maintained the shipowner's exclusive control, the lien could be retained. Broader questions were left for another day. One can see the problem in the course of being worked out. There was a claim in that case by the shipowner for damages for detention "there being no stipulation for demurrage" (at 230). The consignee had both refused the cargo and failed to pay freight. The damages claim was upheld in principle (subject to the verdict of the jury). One of the questions for the jury to consider was "whether under the circumstances of the case he had acted unreasonably in keeping the goods on board for the time he did" (at 240). So that was a case where a lien was exercised and yet the shipowner was entitled in principle to damages for detention.
- In Gaudet v. Brown (Cargo ex "Argos") (1873) LR 5 PC 134 the authorities at Le Havre prevented the discharge of a cargo of petroleum. The shipowner found no nearer port where he could discharge the cargo and so took it back again to London. He was held entitled to his freight, backfreight and expenses, because the consignee was under a duty to discharge the cargo and the shipowner was under a duty to take care of the cargo in the circumstances which had arisen and he had acted reasonably. He could not throw the cargo into the sea, but he was not required to retain and preserve the cargo at his own expense. That was not a case where a lien was exercised, but the case illustrates the doctrine that a shipowner is entitled to be indemnified in contract and/or bailment for the reasonable expenses of dealing with a cargo where the consignee is unwilling or, as here, unable to perform his duty of discharging the cargo (at 161, 165).[7]
- The Great Northern Railway Company v. Swaffield (1874) LR 9 Ex 132 is not a shipping case but it arises out of a contract of carriage by rail. The defendant sent his horse by rail, but there was no one to meet it at its destination. The railway sent the horse to a livery stable. The next day the stable keeper refused to deliver the horse save on his reasonable charges. The owner refused to pay, and the dispute went from bad to worse, while the horse stayed at the stable. Some months later the railway paid the stable's charges and sued the owner for them. The court of exchequer found the owner liable for all the charges, applying Cargo ex Argos (at 138). That was a case where the expenses involved in looking after the bailed chattel were recoverable even though the chattel was liened for those charges. Pollock B said:
- Strang, Steel & Co v. A Scott & Co (1889) 14 App Cas 601 (PC) is a leading case on the nature of the liability to contribute in general average and the lien which comes with it. It was held that a shipowner has not only a right but also an obligation to collect contributions and to enforce his lien for them from contributors not only for himself but also on behalf of all who share in the adventure (in case any of them may be net payees). It was also explained that the origin of these rights and obligations lay in the ancient civil law of the sea, going back to the Lex Rhodia, or else could be explained as founded in implied contract. In any event, they had become part of the law of England, and had their "foundation in the plainest equity" (at 607-8). In these circumstances, it seems to me improbable that the unsatisfactory limitations of the English common law remedy of the artificer's lien can throw much light on these matters. And so, as I follow through this shipping jurisprudence, it turns out to be.
- Little v. Stevenson & Co [1896] AC 108 is a House of Lords authority which recognises a charterer's or consignee's obligation, even where laytime can only begin once a ship is in berth, to do all that he can to enable her to get into berth. Lord Herschell said (at 118 and 119):
- Thus, even outside the special case of general average contribution, the case of a charterer or consignee in a typical contract for carriage by sea is quite unlike the case of the artificer's customer in Somes. There was no recognition in Somes of any obligation on the part of the chattel owner to remove his chattel on the completion of repairs. Whereas the consignee is under an obligation to discharge his goods and by implication under the further obligation, once notice of the ship's arrival at the port has been given, to facilitate its discharge by doing whatever is reasonably necessary to enable the ship to get to the berth where discharge is to take place, and, it may be in the case of a berth charter, where alone laytime starts running.
- In Lyle Shipping Company Limited v. Corporation of Cardiff (1899) 5 Com Cas 87 the ship had earned demurrage while loading at Fremantle, and then sailed to Cardiff. At Cardiff the shipowner claimed the Fremantle demurrage due from the consignee and interrupted discharge in exercise of a lien for demurrage which the contract gave him. Four days were lost before the consignee came to terms. The remaining dispute was as to whether the shipowner had acted reasonably in exercise of his lien and whether he should have discharged the cargo earlier into a statutory warehouse. Bigham J decided those factual questions in favour of the shipowner. He said:
- The judge spoke of damages for detention, not demurrage. This was because no separate demurrage was earned by the vessel at Cardiff during the discharging operation, indeed the contract terms at discharging, unlike loading, did not provide for laytime or demurrage, but simply said "Ship to be discharged with all dispatch, as customary, weather permitting" (at 91-94).[9] There was no further reasoning. It was axiomatic that if the shipowner chose (reasonably) to exercise his lien by way of self help, the consignee remained liable to pay damages for his fault in not paying the (loading port) demurrage and thereby detaining the vessel. Somes was not cited, (and the question raised by this appeal is whether it ought to have been). There was an appeal ((1900) 5 Com Cas 397) but not on this point. I might observe that counsel involved in the case were Messrs Walton QC, Rufus Isaacs QC, Bailhache, Carver QC and Scrutton. Homer might perhaps have nodded, but to be accompanied by Aeschylus, Sophocles and Euripides would be unprecedented.
- Smailes v. Hans Dessen & Co (1906) 12 Com Cas 117 was a factually more complicated case raising identical issues, where the ship refused to discharge because of an outstanding claim for freight, and the argument was again run by the consignee that the ship should have discharged into a statutory warehouse (now under the Merchant Shipping Act 1894) "to mitigate the damages which were increasing every day the ship was kept waiting to discharge" (at 135). The demurrage provisions did not impose an absolute obligation but merely one to use reasonable care "at the rate customary at each port during customary working hours" (at 119 and 127). Lyle Shipping was cited to, but not by, the court. The conclusion was the same. The consignee, by failing to pay the freight and thus to facilitate the discharge, was a wrongdoer and the sole issue was whether the shipowner had failed to mitigate the damages in the form of demurrage which were being caused by the consignee (see at 137, where Collins MR said: "They are bound to act reasonably. Reasonableness begins at home; a shipowner has a right to look at his own interests before he considers how far he can mitigate damages imposed upon another person. A plaintiff is not bound to jeopardise any of his own rights in the hope of mitigating damages that may be payable by his opponent"). On this occasion counsel were Messrs Horridge KC, Bailhache, Scrutton QC and Roche. Thus the same conclusion was reached whether or not damages for detention or demurrage were in issue.
- It was not until Anglo-Polish Steamship Line, Ltd v. Vickers Ltd (1924) 19 Ll L Rep 89, 121 (Bailhache J) that the Somes principle was referred to in this context (albeit it is not named as such in the judgment). But it did not fare well. The case also involved general average and/or salvage, for the ship went aground during her voyage, which was with a cargo of bombs from England to Sweden. The Swedish authorities would not permit the transhipment of the cargo which had been planned. The ship returned to England and discharged her cargo there (but not into a statutory warehouse). The consignees had refused to give a general average bond, and the shipowner exercised its lien. There was a claim for demurrage, backfreight and for the costs of storage. The claim for demurrage was rejected, on the ground that the delay was due as much to the shipowner's failure to provide a salvage bond (requested by the salvors) as to the consignee's fault (at 123). The claim for backfreight was allowed ("there was nothing in the wide world for the master to do with these goods on board but to bring them to some place where he could put them ashore", at 124). That left the claim for the expenses of maintaining the lien (at 125).
- Bailhache J said:
- It seems to me that that case is a direct authority in support of the arbitrators' award, although not of course binding on this court. It is not mentioned in the judge's judgment, because it seems it was not cited to him. Mr Karia submits that either it is distinguishable or that it is per incuriam. It seems to me to be neither. Mr Karia distinguishes it, first, on the basis that the consignees were not seeking delivery back in England, they wanted delivery in Sweden. That is nothing to the point: they wanted their cargo delivered to them (even if in Sweden, but I am not sure what the position was back in England); and in any event the Somes principle is concerned with the lienee's rights, not the lienor's. It cannot be said that a lien was not exercised in Anglo-Polish. Mr Karia next seeks to distinguish Anglo-Polish on the ground that the case turned on provisions for demurrage. However, the judge held that no demurrage was payable, therefore the expenses of storage were not analysed as mitigation for demurrage. It is not a demurrage case. What Bailhache J said, I think correctly when what Lord Campbell said in Somes about contrasting the artificer's lien with the wharfinger's lien is considered, is that (at any rate in contract of carriage or warehousing cases) the essence of the contract is that the bailor is paying for the carrier's or the warehouse owner's carriage and/or storage time: and see also in this respect Vacha v. Gilbert. Furthermore, the cases I have cited above indicate that no difference of principle appears to arise in demurrage cases or damages for detention cases respectively. As for Bailhache J having decided the case per incuriam, that is plainly wrong. Bailhache J clearly had Somes in mind. Mr Karia has to say that Anglo-Polish is wrong. That proposition is in issue in this appeal.
- I cite The Prins Knud [1942] AC 667 (PC) only for the famous observation by Lord Wright about general average (at 689-690):
- I come then to The Winson [1982] AC 939, on which the judge, Mr Karia and in T Comedy Mr Hirst QC relied. The claim in it was by salvors against cargo for the storage charges for salved wheat from a ship which had gone aground on a reef out at sea on a voyage to Bombay. The wheat was salved by 20 April 1975 and taken 420 miles to Manila and stored there, the shipowner abandoned the voyage on 24 April, cargo accepted the storage charges from 24 April, but refused to pay them for the period up to 24 April. Thus it was not a dispute between a shipowner and cargo, and it was not a dispute about a lien (artificer's or otherwise), for a lien was never exercised (at 946G). The House of Lords held that cargo was liable for the disputed storage charges, approving and applying Cargo ex Argos and Great Northern Railway Co v. Swaffield. A relationship of bailment was created between cargo and salvors as soon as the cargo was salved on to vessels provided by the salvors, and just as the salvors had a duty to take care of the cargo, so cargo had an obligation to pay for the reasonable costs of the salvors doing so.
- That had also been the decision of Lloyd J in the Commercial Court. However, the court of appeal ([1981] QB 403) had decided that before the mutual duties of bailment arose between salvors and cargo, a condition precedent of inability to communicate with the cargo owners had to be fulfilled; but this was held by the House of Lords to be erroneous. In this court Megaw LJ mentioned a further point raised on behalf of cargo which it was unnecessary for him to decide, and this involved reliance on Somes and the more recent case decided by Brandon J, The Katingaki. No such point had been raised before Lloyd J, indeed the exercise of any lien had not been pleaded. It is impossible to tell from Megaw LJ's judgment what the point was: he simply said: "I do not find it necessary or desirable to express any views upon that issue" (at 425). In the House of Lords the respondent cargo owner raised the point again (see Mr Pollock QC arguendo at 954), but, with respect, the submission is obscure. It involved the propositions, however, that –
- It is immediately apparent from these submissions how difficult it is to fit the complexities of a contract of carriage by sea into the Somes simplicity of a straightforward common law artificer's lien of pure self help uncomplicated by contractual terms or implications. Mr Anthony Clarke QC for the salvors was not required to reply.
- As to this, it would seem that Lord Diplock had his own difficulties with the lien point (see at 962B-D, and his "if I have succeeded in following it aright"). Lord Diplock continued:
- I would observe that this whole passage, while entitled to the fullest respect as coming from Lord Diplock, is entirely obiter. Moreover, Lord Diplock was expressing a certain scepticism as to the value of the Somes principle and was clearly of the mind that it was a much more limited principle than was being suggested. In particular he was suggesting that it was not to be extended and made it clear that it did not arise unless (a) a right of lien was being exercised against a demand for delivery, (b) the sole reason why the goods remained in the lienee's possession was the exercise of the right of lien, (c) the expenses incurred by the lienee were exclusively for his own benefit in maintaining the lien, and (d) the lienor derived no benefit as owner of the goods from such expenses. Lord Diplock no doubt highlighted these matters because they were relevant to the facts and arguments before their Lordships. What he was not concerned with, however, were other considerations which might arise, such as those which I have highlighted in discussing Somes and the shipping cases above. It is to be remembered that on the facts of The Winson everything arose out of the misfortune of the ship out at sea, far from the discharge port. The cargo owner had no responsibility for that misfortune and was not suggested to be in breach of any obligation concerned with taking delivery at the discharge port or with delaying the ship or its voyage in any way. The lis was in any event not with the shipowner but with salvors. And as to the contract made between cargo and the salvors, Lord Diplock was cautious to say nothing about how that might affect the Somes principle, but he was very conscious that it might well do so. I do not think it is safe to say other than that Somes stands for some proposition affecting a purely common law lien in the limited circumstances sketched by Lord Diplock, and that that proposition was not in play on the facts of that case, and that the facts of that case are equally distant from the facts of our case.
- The Boral Gas [1988] 1 Lloyd's Rep 342 (Evans J) was another case where Somes was cited but not applied. In that case there was a claim on the last voyage of a consecutive voyage charter in respect of demurrage earned on the earlier voyages, a contractual lien for demurrage was purportedly exercised and discharging was halted for a number of days. However, the shipowner's claim for demurrage incurred during the exercise of the lien failed, since Evans J held that the charter did not give a lien on one voyage in respect of demurrage on any other voyage, and indeed did not, on its true interpretation, give a contractual lien for demurrage at all. In the circumstances the alternative argument raised on behalf of the charterer in reliance on Somes did not have to be determined. However, on the hypothesis that a contractual lien for demurrage had been granted, the judge rejected the submission, and he did so irrespective of the question, debated before him, of whether, as a matter of laytime jurisprudence itself, the ceasing of discharge for the shipowner's own purposes stopped the running of laytime. As to that submission, he said (at 349) that –
- Evans J then continued, giving his reasons why the Somes submission failed irrespective of the difficult issue raised on laytime jurisprudence:
- Thus, for yet other reasons, but with the same result, the Somes principle was held to be inapplicable. The "authorities" there referred to by Evans J were Lyle Shipping and Smailes v. Hans Dessen, and the passage from Scrutton citing those cases is set out at 347 of the report of Evans J's judgment. Although Evans J referred to the (purported) lien as being a contractual lien, his reasoning does not seem to me to depend on whether it is or is not. Whether the lien is given by contract or the common law, any obligation to discharge is qualified by the right to lien. Moreover, although Evans J also referred in that last paragraph to "demurrage", nothing would seem to depend on any principle of "once on demurrage always on demurrage", since nothing depended on laytime jurisprudence: and in any event the stoppage appears to have commenced during the laytime and before any demurrage accrued – see at 347 where Evans J says "The underlying question is whether laytime counted and demurrage accrued during the period of the dispute…".
- By the time of The Olib [1991] 2 Lloyd's Rep 108 Webster J held that it was virtually unarguable that the shipowner was not entitled to recover his expenses where cargo had been discharged ashore in the absence of any valid consignee instructions (at 116).
- The World Navigator [1991] 2 Lloyd's Rep 23 (CA) is concerned with damages for detention. Although the precise formulation of the implied term by which a charterer or consignee is obliged to facilitate the ship to become an arrived ship was not and did not need to be decided, this court affirmed the long standing rule that such an implied obligation existed and that breach of it could lead to damages (although in that case it did not): see headnote (1) and per Parker LJ at 30.
- Finally, in ENE Kos 1 Ltd v. Petroleo Brasileiro SA (No 2) [2012] UKSC 17, [2012] 2 WLR 976 the Supreme Court has affirmed and applied the jurisprudence based on Cargo ex Argos and Swaffield which had itself been applied in The Winson, while emphasising that the matter did not depend on a doctrine of agency of necessity but on the principles of bailment. There a time charter was terminated by the shipowner in mid-voyage but in port under the charter's express termination clause. The charterer subsequently discharged his cargo. The shipowner claimed payment for the time taken in discharging and for bunkers consumed. The commercial judge awarded the claim pursuant to the rights of a non-contractual bailee of goods, and that result was restored by the Supreme Court. However, the Supreme Court also found in favour, albeit only by a majority, of the shipowner's contractual claim under the time charter's employment and indemnity clause 13, indeed that was the majority's primary holding (see at para [18]).
- There was no exercise of any lien in that case, but there was of course in Swaffield. In the circumstances, the Somes principle was not directly in issue. However, Lord Sumption paid a glancing reference to a much broader principle at the outset of his discussion of bailment when he said this:
- Those remarks of course could apply equally to the present case. and that is so whether or not the contractual adventure in our case is regarded as continuing so as to include the landing of the cargo in Hamina. Moreover, the law of general average makes abundantly clear that the obligation of cargo to contribute to general average expenditure and the shipowner's right and obligation to exercise his lien to preserve the collection of that contribution are the very antithesis of officious interference or voluntary assumption of possession.
- The other observation I would make is that throughout his judgment Lord Sumption emphasises that the shipowner had no reasonable alternative, no practical choice but to remain in possession and take care of the cargo.
- After this full consideration of the authorities, I can draw my conclusions together relatively quickly.
- In my judgment, the Somes principle is a narrow one, applicable to an artificer's lien but of doubtful status outside that context. It appears to be founded in the technical doctrine that a right of lien does not carry with it any cause of action to recover an indemnity for the expenses of exercising it in the absence of some other basis for recovery, such as in contract or bailment or tort. It also appears to be founded in a pragmatic concern that an artificer may act purely for his own benefit in retaining the chattel, in circumstances where there is no breach involved on the part of the lienor other than the failure to pay the price of the artificer's labour, which is the failure which gives rise to the lien, and where there is no benefit to the lienor. It is not clear, for there was no discussion in Somes, why that breach (of non-payment) does not by itself give rise to a claim in damages, where the natural and reasonable consequence is that the chattel is retained to secure performance of the obligation to pay. It may be, but I speculate, it is on the ground that no damages are ordinarily payable for breach of an obligation to pay money. Of particular importance for these purposes, however, is that in the ordinary case of an artificer's lien contemplated in Somes there is no breach of contract involved in the lienor's failure to remove his chattel from the artificer at the time due for payment (see Lord Wensleydale's example of the tailor) and no contemplation let alone contract that the lienee will be inconvenienced or incur expense as a result of the exercise of his lien or that the lienor will be expected to pay accordingly.
- Such a doctrine may work more or less satisfactorily in the typical case of an artificer's lien, but in a highly commercial setting such as ship-building or ship-repairing the Somes case itself illustrates the harshness and uncommerciality of the limitations of the doctrine. Where the lienor cannot pay, the lien is worthless, because it does not bring with it a right of either expenses or sale; and where the lienor will not pay, he can blackmail the lienor with the expense of retention: even though he could choose, if he wished, to obtain the release of his chattel by giving adequate security for the lienee's claim (and nowadays by a payment into court).
- Fortunately, there is no sign that the Somes principle was of wide application. It was subject to any express or implied contract for the payment of the expenses of retention, as the Somes case itself recognised. Such a contract might well have been inferred in Somes itself, and no principled extension of its principle can be found in the circumstance that the inference of a contractual obligation to pay for continued use of the dock did not commend itself to the courts hearing that case. Nevertheless, in a different context, such as that of the wharfinger, Lord Campbell recognised the already existing jurisprudence whereby storage fees would continue during the period of retention: Rex v. Humphery; and see also Vacha v. Gillett and Swaffield. The rationale that the retention is merely the lienee's option of self-help for his own benefit and is not to be visited on the defaulting lienor could in theory have been applied even in the case of a wharfinger's lien (by analogy to the unsuccessful submission adopted by the charterer in The Boral Gas), but the common law did not press its doctrine that far: it was sufficient that there was a contractual right which could supplement the jejuneness of the common law remedy. If there was, it was not said that the exercise of the lien was merely for the benefit of the lienee, without fault on the part of the lienor (other than his failure to pay) so that the expense involved in the retention of the chattel by the lienee was to be regarded as being for his own account.
- In particular, it seems to me significant that the examples of application of the Somes principle available to our court are few and, with the exception of The Katingaki which more or less reproduced the facts of Somes, not of a commercial nature. It is also to the highest degree significant that despite the enormous care taken by counsel to research the issue, no case applying the Somes principle can be produced in the shipping context of carriage of goods by sea. The closest example is T Comedy, a case of carriage of goods by road, but I have expressed my puzzlement over that decision above. In the shipping context, whether the rationale is the presence of an obligation to receive and discharge the cargo; or the presence of demurrage provisions; or the breach of the obligation not to delay the vessel, even outside laytime and demurrage provisions, where such delay gives rise to damages for detention; or the recognition that a demand for the discharge of cargo is invalid where a prior obligation to pay freight or some other payment for which there is a lien has not been met, so that the consignee cannot be said to be complying with his obligation to receive and discharge the cargo (see The Boral Gas and Voyage Charters at para 10.19); or, where the contract of carriage has come to an end, and the shipowner has had to incur expense to take care of the cargo but still wishes to retain the cargo subject to a lien for the payment of such expenses; for one reason or another, the Somes principle has been kept at a distance.
- Thus Swaffield, a case of contract of carriage by rail, has been approved and applied by the House of Lords in The Winson and by the Supreme Court in ENE Kos. It is a case where the owner could not have his horse back without paying the storage expenses incurred by reason of his failure to collect the horse at the right time and/or by reason of his invalid demand to recover the horse without paying the storage expenses being incurred. Lyle Shipping is a case where a lien was claimed and the resulting delay had to be paid for by the consignee as damages for detention. Smailes v. Hans Dessen is an almost identical case, although there the expenses of the delay caused by the exercise of the lien were to be found in an obligation to pay demurrage. Neither case has ever been doubted. Anglo-Polish Steamship is an authority on almost identical facts to our own. The decision in my judgment was neither per incuriam nor wrong. On the contrary it is consonant with the whole of the shipping jurisprudence.
- Shipping is performed on the basis that time is money and that a ship is a floating and travelling warehouse for which cargo must pay either in the form of agreed freight or hire, or by way of damages for any breach of contract. If the ship is delayed by the cargo owner's failure to arrange timely discharge: whether that failure is his breach in facilitating the vessel's arrival in berth where she may become an arrived ship (and thus start the laytime clock running which may in due course lead to demurrage), or whether he has incurred demurrage under the laytime code; or whether there is no laytime or demurrage code, but merely a general obligation to discharge according to the custom of the port or with customary despatch; or whether he has delayed discharge by refusing to discharge a lien for freight or any other payment for which the ship has a lien and has thereby given invalid instructions to discharge; then the contractual arrangement contemplates that either by the means of the liquidated damages known as demurrage, or by means of general damages for detention, the cargo owner must pay (subject of course to any express exceptions to his liability). That is the commercially just result, and the authorities reflect the search for the just and reasonable result. Thus the exercise of a lien must be reasonable and there must be no failure to mitigate damages, but subject to such commercially sensitive principles, the exercise of a lien is no excuse from contractual liability. Even if the Somes principle were prima facie capable of applying, the contractual context, as contemplated in Somes itself, would take the case out of it. And if the contract comes to an end, as in ENE Kos, then the ship will in any event be entitled to claim the cost of taking care of cargo and to continue to enforce any lien it has.
- I would not therefore accept the judge's distinction between demurrage and damages for detention. The authorities such as Lyle Shipping and Smailes v. Hans Dessen show that the same conclusion is reached in either case. The Boral Gas shows that nothing turns on any particular laytime/demurrage language or jurisprudence. It is rather that the charterer or consignee cannot complain that the shipowner is causing the delay himself when everything starts with the cargo interest providing invalid instructions for discharge. It is more therefore than a mere failure to pay: the failure to pay means that there is no valid instruction to discharge or true willingness to receive the cargo. It is as though the customer who does not pay his tailor is contractually in breach for leaving his finished clothes at his tailor's. Even if, therefore, it were permitted to go beyond the consignee's concession to the arbitrators concerning the incurring of demurrage at St Petersburg, which in my view it is not, the arbitrators were right to say that the unreasonable intransigence of the consignee gave rise to a liability in damages for detention which the owner was entitled to mitigate.
- Nor would I accept the judge's reasoning that the Somes principle entails that, as a matter of law, the exercise of the lien has to be deemed to be for the sole benefit of the shipowner. In The Winson, even Mr Pollock QC, who relied on Somes, recognised that the benefits are mixed: the shipowner preserves his lien in his own interest, but the cargo interest is also benefited by the continuing care of his cargo. That was the arbitrators' finding and it should be respected. It reflects the commercial realities and the justice of the situation. A shipowner should not be required to abandon his lien because the only other choices facing him were the disastrous ones of turning his ship into a floating warehouse for an indefinite period, or throwing the cargo into the sea, or storing them on land at his own expense.
- Above all in the context of general average, there is in my judgment no room for the strictness of the Somes principle. General average becomes part of English law through the general, internationally recognised, law of the sea deriving from the Lex Rhodia. The shipowner has an obligation, as well as a right, to collect general average contribution, or security for it, from all contributors and on behalf of all parties to the adventure. Mr Karia submits that there could have been no question in this case of the only other cargo interest involved, the steel pontoons carried on deck, being a net payee of general average contributions. In my judgment that does not undermine the shipowner's duty to collect general average contributions on behalf of all contributing interests (although it could of course mean that, if the duty were not complied with, then the shipowner would not be liable in damages as a result). However, quite apart from that obligation, there is no reason why the lien for general average should be subject to a strict but narrow principle deriving from the English common law's artificer's lien, as the citation from The Prins Knud makes abundantly clear.
- It is not surprising to me that the Somes principle has developed no progeny within shipping law, when I consider the background to that principle in the distant doctrine of the distraint of animals.
- In these circumstances, Mr Karia's submission that Somes is the overriding principle is to my mind profoundly mistaken.
- The arbitrators did not say anything in their award to clarify whether they considered that the contract of carriage had come to an end, for instance on departure from St Petersburg or after landing the cargo into storage at Hamina. But they put their solution in both contract and in bailment. It seems to me, as it did in a slightly different context to Lord Sumption in ENE Kos, that the practicalities, justice and applicable principles of the matter should not lead to a different conclusion in either event. If the expenses of exercising a lien may be claimed in a post-contractual situation of bailment, there should be all the more reason for reaching the same result in a contractual bailment. That was what the arbitrators found and held, and I think they were entitled to those conclusions.
- In sum, I would dismiss the consignee's appeal on question 1 concerning the alleged discharge of the lien on the 98 coils, and allow the owner's appeal on question 2 concerning the applicability of the Somes principle. In the result, the appeal from the arbitrators' award fails and the award is upheld.
- I would not wish to end my judgment without commending all counsel involved for the excellence of their submissions, both written and oral.
- I agree.
- I also agree.
Sir Bernard Rix :
The appealed questions of law
"1. Both the capture by pirates and the subsequent main engine breakdown are well made out instances of general average events;
2. Payment of the ransom and the cost of the tow to Salalah are allowable GA disbursements.
3. The Ship's calls at Salalah and Hamina were not unjustifiable deviations.
4. The Owners have not breached any warranty in respect of seaworthiness or obligation to exercise due diligence.
5. The Owners are entitled to exercise a possessory lien over the Cargo for MMO's contribution to GA disbursements.
6. Although the Owners have no power to compel MMO to provide GA security, their requests for GA security from MMO in the form of a bond supported by an insurer's guarantee or a cash deposit were reasonable in principle, form, amount and circumstance.
7. MMO's failure to discharge the lien by way of GA security or otherwise in respect of the entire Cargo was a breach of its obligation to take delivery pursuant to the contracts of carriage. MMO's refusal to provide GA security other than a guarantee for 9% of the Cargo was unreasonable, incomprehensible and irrational.
8. The actions taken by the Owners to preserve their lien were reasonable, including taking the Cargo to Hamina and placing it in secure storage and not releasing the 98 coils covered by an insurer's guarantee and not releasing a value-related proportion of the balance of the Cargo.
9. MMO's conduct subsequent to the placing of the Cargo in store in Hamina has manifested not merely an abject failure to mitigate any losses they might be suffering as a consequence of being kept from the Cargo but also, inexplicably, an apparent intention to do all that was possible to avoid any form of negotiated outcome and to delay ultimate resolution…
12. MMO is solely responsible for the costs incurred by the Owners in connection with storing the Cargo at Hamina, including berthing and handling charges and reasonable legal costs.
13. The Owners have committed no breach of any contract of carriage in respect of the cargo; at no time have they converted any part of the Cargo; and they are not responsible for any loss or damage that MMO may have suffered arising from or connected with any of the matters considered herein."
"Question 1: Are shipowners (here the Defendant Owner) entitled to refuse to deliver up cargo covered by a bill of lading (here, 98 steel coils covered by bill of lading 4) to the consignee under that bill (here, MMO) in purported exercise of their lien for general average contribution for that cargo even after they have received and accepted an unlimited general average contribution guarantee from the insurers of that cargo undertaking, in consideration of the delivery of that cargo to the consignee, to pay the shipowner any general average contribution due in respect of the cargo?
Question 2: Are shipowners entitled to recover storage and other expenses incurred by them in exercising their lien over cargo after its discharge from the vessel?"
The requested bond and guarantee
"In consideration of the delivery to us or to our order, on payment of the freight due, of the goods noted above we agree to pay the proper portion of any salvage and/or general average and/or special charges which may hereafter be ascertained to be due from the goods or the shippers or owners thereof under an adjustment prepared in accordance with the contract of affreightment governing the carriage of the goods or, failing any such provision, in accordance with the law and practice of the place where the common maritime adventure ended which is payable in respect of the goods by the shippers or owners thereof…
We also agree:
(i) to furnish particulars of the value of the goods, supported by a copy of the commercial invoice rendered to us or, if there is no such invoice, details of the shipped value
(ii) to make a payment on account of such sum as is duly certified by the average adjusters to be due from the goods and which is payable in respect of the goods by the shippers or owners thereof and
(iii) that this agreement shall be governed by English Law and the High Court of Justice shall have exclusive jurisdiction over any dispute arising out of this agreement, and each party shall irrevocably submit to the jurisdiction of the English Court,
(iv) that any period of prescription whether provided by statute law, contract or otherwise, shall commence to run from the date upon which the general average adjustment is issued."
No such bond was supplied by the consignee.
"In consideration of the delivery in due course of the goods specified below to the Consignees thereof without collection of a deposit, we, the undersigned insurers, undertake to pay to the Shipowners or to the Average Adjusters, Stichling Hahn Hilbrich, on behalf of the various parties to the adventure as their interests may appear, any contribution to General Average and/or Salvage and/or Special Charges which may hereafter be ascertained to be properly due in respect of the said goods."
The bills of lading
"(1) All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated…
(3) General Average
General Average shall be adjusted, stated and settled according to the York-Antwerp Rules 1994, or any subsequent modification thereof, in London unless another place is agreed in the Charter Party…"
The gross weight of the 98 coils under bill of lading 4 was given as 519.085 metric tons.
Further findings of the award
"12.13 With the intention of preserving the lien for so long as necessary, and having discounted berthing as being almost certain to lead to the loss of the lien, the Owners had only two options, wait at the St Petersburg anchorage or sail away. Having failed to make worthwhile progress in negotiations with MMO and not being confident that the Ship would not be forced by the St Petersburg authorities to berth, they chose the latter…
12.16 We find that the owners made their decision to order the Ship away from St Petersburg in good faith after five fruitless days at the anchorage, after careful consideration of the available options and concluding that there was no credible alternative.
12.17 It follows from the above that we find that the Ship sailing to Hamina was not an unjustifiable deviation; on the contrary it was a reasonable and necessary act for the preservation of the lien over the Cargo for the benefit of all parties to the common adventure."
"13.26 The Ship arrived at the St Petersburg anchorage on 20 September. After waiting a few days, the Owners concluded from the advice received that they had three options:
1. Bring the ship into port knowing firstly that the Cargo would almost certainly have to be discharged and would pass out of the Owners' control and that, in consequence, their lien would be lost and secondly, there was a high probability that the Ship would be arrested by MMO.
2. Let the Ship remain at the anchorage for an indeterminate time, uncertain as to what might happen, fearing that at any time she could be ordered into port.
3. Order the ship to leave Russian waters…
13.28 We are satisfied that the Owners' decision to order the Ship to sail from St Petersburg anchorage on 25th September was commercially and legally legitimate. The decision was based on carefully considered commercial and legal advice and was, in essence, the only option short of capitulation. Having explored the alternatives with their local agents and lawyers the Owners concluded that departure was the only way of preserving the lien on the Cargo, not only for their own benefit but for the benefit of other cargo interests as well. We agree.
13.29 We find that the Owners' actions at St Petersburg and subsequently have not prejudiced their lien over the Cargo."
"14.1 Once a GA event has occurred and GA has been declared, the owner of the relevant ship holds a lien over all cargo on board the ship in respect of the liability of the owner of each piece of cargo to contribute towards the allowed GA disbursements. The lien over a given piece of cargo is customarily discharged by the provision of appropriate security. As it is usually the case that the full extent of the allowable GA disbursements is not known at the time GA security is provided, the level of security can only be based on the estimated expenditure.
14.2 GA security is generally provided in the form of two separate instruments, a bond and a guarantee; these are usually requested on well used, industry standard forms. The GA bond is furnished by the cargo interests to the effect that they will answer to a demand in due course for contribution to GA disbursements even if they might not otherwise be the liable party. The GA bond is supported by a GA guarantee which is provided by the insurers of the party providing the GA bond, insuring the bond provider's liabilities under the bond.
14.3 In the event that an insurer's guarantee is not available, the cargo interests will be required to support their bond by way of a cash deposit, bank guarantee or other form of acceptable security. For convenience, unless the context otherwise requires, further references to a GA guarantee and similar should be taken to include references to a cash deposit, bank guarantee and similar as well as an insurer's guarantee.
14.4 In the present case…contrary to what is generally recognised as the almost invariable practice, MMO failed to provide GA security for the entirety of the Cargo.
14.5 A small part of the Cargo, 98 steel coils carried under B/L 4, was insured, for which an insurer's guarantee was provided. The balance of 991 coils was uninsured; in respect of this balance, SSH sought a cash deposit from MMO on behalf of the Owners but no deposit has been provided.
14.6 Similarly, despite repeated requests from SSH, MMO has continued to refuse to provide a GA bond or bonds in respect of any of the Cargo.
The Owners' Position on GA Security (in Summary)
14.7 The Owners maintain that they are entitled to both a GA bond and a GA guarantee for all the Cargo in accordance with the established practice and, more importantly, in order to be properly secured. They argue that in the absence of a GA guarantee they have no means of obtaining payment if they are unable to recover sums due from the bond provider and, in the absence of a GA bond, they cannot be confident that the party whose liability is insured under the GA guarantee will be the party liable to contribute in GA. Without a GA bond, the Owners could find themselves unable to recover either from the liable party or the guarantor.
MMO's Position on the Need for a Bond
14.8 MMO disagrees with the Owners in respect of the claimed need for a GA bond. MMO is the consignee under the Bs/L and is therefore bound by the Bs/L terms. Clause 3 of the Bs/L imposes an obligation on MMO to contribute to GA disbursements that is comparable to the obligation in the proposed GA bond; the demand for a GA bond was therefore an unnecessary requirement and the additional security thus demanded was therefore unreasonable.
14.9 Furthermore, says MMO, a GA bond would have been a new and additional contract between the Owners and MMO but MMO was under no obligation to enter such an additional contract. Even if such an obligation existed, how can a breach of the obligation entitle the Owners to take and retain double security?
14.10 Finally, MMO argues that although there might have been a historic justification for a GA bond, with the passing of the Carriage of Goods by Sea Act 1992, that justification has passed. In particular, s. 3(1)(a) thereof provides that a receiver, like MMO, who demands delivery of goods to which a bill of lading relates, becomes subject to the same liabilities under the bill of lading contract as if he had concluded it himself, including the liability to contribute in GA.
14.11 MMO maintains that the Owners therefore have no right to, or need for, a GA bond.
Our Findings on the Provision of GA Security
14.12 No authority has been cited to us by either party for or against the proposition that a cargo interest is, without more, obliged to provide GA security in response to a demand from a shipowner.
14.13 We have seen nothing in the Bs/L or the voyage charter suggesting that MMO is under an obligation to respond positively to a request for the provision of GA security from the Owners.
14.14 It is not disputed that the Owners were entitled to exercise a lien over the Cargo for MMO's contribution for GA disbursements and we find that the Owners have done nothing to prejudice that lien; the lien therefore subsists.
14.15 The Owners have indicated that they will release their lien if security in the form of a GA bond supported by the existing GA guarantee for the B/L 4 coils and a cash deposit for the Bs/L 1, 2 and 3 coils is provided.
14.16 MMO declines to provide a GA bond in respect of any of the Cargo and a GA guarantee or a cash deposit for the Bs/L 1, 2 and 3 part of the Cargo.
14.17 We find that the amount of the cash deposit agreed between SSH on the Owners' behalf and MMO of US$920,000, and the terms upon which the deposit would be held are reasonable having regard to the approximate level of GA disbursements and the contributing values as assessed by SSH, and we note that there would be no cost to MMO in executing a GA bond in favour of the Owners.
14.18 Until either the GA security is provided or the Owners receive payment of MMO's contribution to the GA disbursements or MMO does something else that leads to the discharge of the lien, the Cargo remains subject to the lien.
14.19 For MMO to become entitled to possession of the Cargo they must first procure the release of the lien by providing GA security or in some other way, as outlined above.
14.20 Unless and until MMO procures the release of the lien, or some other relevant intervening event occurs, the Owners must continue to care for the Cargo.
14.21 It is clear from the above that although there are remedies available to the Owners, who cannot be expected to care for the Cargo indefinitely, they cannot compel MMO to provide GA security. Nevertheless, the initiative for resolving the deadlock prima facie lies with MMO and we find that MMO has failed to do that which was reasonably expected of them by the Owners, namely to discharge the lien by providing GA security in the amount and form requested, or in some other way…
The Guaranteed 98 Coils
14.30 Repeating its argument above about bonds, MMO says that the Owners' refusal to release the 98 coils under B/L 4 which were covered by a GA guarantee was wrongful and the Owners were guilty of conversion of the 98 coils.
14.31 The Owners respond that they were entitled to demand a GA bond as part of the price of giving up their lien on the 98 B/L 4 coils; no bond has been provided so the lien remains.
Findings
14.32 If the GA guarantee for the 98 coils, unaccompanied by a GA bond, was not sufficient to discharge the lien, our findings above about GA security of course include the B/L 4 part of the cargo. However, if, contrary to our findings above, the insurer's GA guarantee, even though not accompanied by a GA bond is sufficient GA security to discharge the lien on the 98 B/L 4 coils, then, looking at the issue in isolation, the Owners should not have retained the 98 coils at Hamina. Instead they should have delivered the 98 coils to St Petersburg. However, it is not realistic to look at the 98 coils in isolation and it is necessary to apply a measure of proportionality.
14.33 The 98 coils represented less than 9% of the total of 1,089 coils and, on the evidence, were not sufficiently different from the other 991 coils to make it easy to identify them during unloading at Hamina or once they were in store. Furthermore, it is likely that the Owners anticipated that the entire Cargo would remain in storage for no more than a few weeks before being delivered as a whole to MMO. It is also likely that the labour costs and the risk of handling damage to the Cargo as a whole that would have been incurred if the 98 B/L 4 coils, which in storage were mixed in with all the other coils, had been sought and extracted, would have been disproportionately high when set against the possible benefit. Taking all the foregoing into account, the Owners' actions in retaining the 98 coils with the other 91% of the Cargo was, regardless of issues of GA security, reasonable and consistent with their obligation to care for the Cargo as a whole.
Summary
14.34 Once a GA event has occurred a shipowner is entitled and obliged to do all that is reasonably necessary to preserve its lien over all cargo for its own benefit and for the benefit of all the other parties in the common adventure. In the present case we find the Owners' actions to be wholly consistent with this principle. By way of contrast, we find the behaviour of MMO, including particularly its refusal to provide a GA bond, inexplicable.
14.35 MMO, and only MMO, could at any time from the moment security was first demanded and still can even now, procure the release of the lien by providing (a) GA bonds for the Cargo at no cost to themselves, and (b) an appropriate cash deposit in respect of the uninsured part of the Cargo. The reasons why MMO has not done so are unfathomable. In particular, we do not accept MMO's argument that the only option open to them was to arrange a cash transfer from their Russian bank and that Russian exchange control regulations prohibit them from so doing."
"MMO's Position
15.4 MMO argue that there are a number of reasons why the Owners are not entitled to the Hamina expenses:
(i) Had the Owners exercised their lien off St Petersburg they would have been entitled to demurrage from the voyage charterers but this entitlement was lost when the Cargo was discharged ashore…
(iii) On the basis of Somes v British Empire Shipping (1858) E B & E 353, in the absence of a contractual agreement there can be no claim for the costs of exercising a lien…
Our Findings
…
15.6 MMO accepts that had the Owners exercised their lien off St Petersburg they would have been entitled to demurrage for the time the Ship waited…
15.8 Not until 12 days after arriving at the St Petersburg anchorage did the Ship begin unloading the Cargo into secure storage at Hamina. Storage at Hamina was considered by the Owners to be a pragmatic solution to allowing damages for detention to accrue for an indefinite period at St Petersburg. We agree.
15.9 Whilst in warehouse storage in Hamina, the Cargo has remained under the control of the Owners.
15.10 We have already found that ordering the Ship away from St Petersburg was a rational, commercially expedient and legitimate means by which the Owners could retain their lien for GA security over the Cargo whilst continuing to care properly for the Cargo and minimising costs. We further find that, in the face of MMO's continuing failure to provide acceptable GA security, the unloading into secure storage at Hamina was a proper, logical and natural extension of this action and is wholly consistent with the Owners' duties and obligations towards MMO and the deck cargo interests and with protecting their own legitimate interests…
15.12 We find all three of the Owners' bases for their claim for reimbursement of the storage costs to be persuasive:
1) MMO is deriving a benefit from the Owners' abiding by their continuing duty as bailees to look after the cargo and on The Winson principles MMO should reimburse Owners for the costs incurred.
2) By failing to discharge the lien for GA security, MMO is in breach of its contractual obligation to take delivery of the Cargo and is liable to the Owners for the storage costs as damages arising from the breach.
3) The Hamina costs are a substitute expense for detention to which the Owners would have been entitled if the Ship had remained at St Petersburg waiting for MMO to discharge the lien…
15.16 As we have already found that the Owners were under no obligation to identify and release the 98 coils under B/L 4 for which insurers provided a GA guarantee…there is no basis for apportioning or adjusting the Hamina costs and we do not do so."
The voyage charter
23. Arrived Ship
The vessel is deemed to be an arrived ship only after it is in free pratique and customs cleared after the shippers/receivers have received the notice of readiness to load/discharge from the Master…The notice of readiness can only be tendered in writing after the ship's arrival at the designated berth whether customs cleared or not, whether in free pratique or not within regular working hours…
25. Load/discharge, tally
…The cargo to be…discharged free of risk and expense to the vessel on customary quick despatch att [sc at] all ends with no demurrage/no despatch…
32. Discharge port notices
Owners/Master to tender to Chrs 10/8/6/4 days approximate and 3/2/1(s) definite notice of arrival at load/discharge port to enable Charterers/Shippers/Receivers to get cargo/documents ready accordingly…
40. Detention money
Detention rate of USD 8500 PDPR all ends to apply in case:
LDports: A) Cargo is not ready for shipment
B) Customs/ export documents are not in order
Disport: A) Customs/ import documents are not in order
Detention is not applicable in case of port or berth congestion
Shipowners grant charterers 24 hours grace before detention at both ends. Detention, if any, to be paid within 20 days after receiving all supporting documents and detention amount mutually agreed."
"[75] Under those provisions, the Vessel would not become an arrived ship until she arrived in berth, and only at that time would the charterer's obligation arise under clause 25 to "discharge free of risk and expense to the vessel on customary quick despatch". The Vessel never became an arrived ship at berth in St Petersburg because Owners refused to berth, in exercise of their lien. Nor did the demurrage provisions in clause 40 apply. Accordingly Owners claim is a claim for damages, not demurrage or costs incurred in mitigation of demurrage."
In that paragraph Popplewell J himself used the expression "demurrage" as a synonym for the "detention money" of clause 40.
Question 1: the judgment
Question 1: the submissions
Question 1: discussion and decision
"Causes of action for unliquidated sums that, in the absence of earlier agreement as to quantum reached between the parties themselves, will only become quantified by the judgment of a court or the award of an arbitrator, accrue at the time that the events occur which give rise to the liability to pay to the plaintiff compensation in an amount to be subsequently ascertained. They are commonplace in the field of contract as well as in the field of tort. Unliquidated damages for breach of contract, claims on a quantum meruit, claims for salvage services under Lloyd's open form of salvage agreement are examples and in their Lordships' view it was rightly decided in Chandris v. Argo Insurance Co. Ltd. [1963] 2 Lloyd's Rep. 65, that claims for contributions in general average under contractual provisions which do no more than require general average to be adjusted according to York-Antwerp Rules fall within this class and that, accordingly, the cause of action under such a provision in a bill of lading accrues at the time each general average sacrifice was made or general average expense incurred" (at 237/8).
"The average bonds, to give them their common though legally inaccurate description, were in the usual Lloyd's forms which appear to have been in use in substantially the same terms for well over a century: Svendsen v. Wallace (1885) 10 App. Cas. 406, 410. There are two varieties one of which provides for security in the form of a cash deposit on joint account in a bank, the other does not call for any cash deposit but it is stated on its face that it is: "To be used in conjunction with underwriters' guarantee."
…it is convenient to set out their terms omitting only those relating to the cash deposit in the bonds which were not accompanied by an insurer's guarantee:
"An agreement made…between owner of ship…and the several persons…being respectively consignees of cargo…now therefore…the said owner…hereby agrees…that he will deliver to them respectively or to their order respectively their respective consignments…and the said parties…hereby agree with the said owner that they will pay to the said owner of the said ship the proper and respective proportion of any salvage and/or general average…which may be chargeable upon their respective consignments…"
This is a fresh agreement which stands on its own independently of the bill of lading and is for fresh consideration on either side: the release by the shipowner of his claim to any possessory lien for a general average contribution…and the assumption by the consignee of a personal liability, secured by a cash deposit or an insurer's guarantee, to pay such general average contribution/charge which may have been payable, at common law, by the owner of the consignment at the time of the general average act or, under the contract of affreightment, by the shipper (each of whom, particularly in the case of a general ship, may well be someone other than the consignee)…The usual practice is for the actual payment of contributions/charges to be deferred until completion of the general average statement, unless, as did not happen in the instant case, the average adjuster has given a certificate providing for some interim reimbursement to be made to a claimant for a general average loss without prejudice to ultimate liability.
In their Lordships' view, although, from the point of view of clarity, the draftsmanship of the Lloyd's forms of average bonds leaves much to be desired, the application of commercial common sense to the language makes clear the intention of the parties to it as respects payments by consignees. The contractual obligation assumed by the consignee is to make a payment of a liquidated sum at a future date which will not arrive until the general average statement has been completed by an average adjuster appointed by the shipowners. That in the instant case, where no question of the issue by the adjuster of certificates for interim reimbursement arose, was the earliest date at which the shipowners' cause of action against the consignees under the average bond for payment of general average contribution arose. It was not time-barred at the date of the application of 19 July 1979 to add the shipowners as additional plaintiff…" (at 240/1).
"The letters of guarantee given by the various insurers were not in identical terms….Although the expression "we hereby guarantee" appears in each of the forms the verb "guarantee" is used loosely, as meaning "agree" or "undertake" and not in its strict legal sense of agreeing to answer for the debt, default or miscarriage of another. By each of the forms of letters of guarantee the insurers assume a primary liability to pay a sum of money on the happening of a defined event."
In the insurer's guarantee in our case the word "guarantee" in the body of the text has been replaced by the word "undertake".
"Whether a lien is waived or not by taking a security depends upon the intention expressed or to be inferred from the position of the parties and all the circumstances of the case. In this particular instance we are dealing with a solicitor and his client. It strikes me that if a solicitor takes from his client such a security as this solicitor took the prima facie inference is that he waives the lien. That appears to me the right and proper conclusion to come to, bearing in mind that it is the solicitor's duty to explain to his client the effect of what he is about to do. In the case of a banker, I should not draw the same inference, since a banker has not a similar duty towards his customer. Bearing in mind the position of the parties, and having regard to the decision of Sir John Leach in Robarts v. Jefferys, we are justified in saying that in the absence of evidence to the contrary, the true inference from the circumstances is that the lien was waived."
Question 2: the judgment
"[64] I conclude that the principle to be derived from these authorities is that where a gratuitous bailee incurs expenses in carrying out his duties in preserving and caring for the goods, he has a correlative right to recover such expenses from the owner of the goods, provided that he is not denying possession of the goods to the owner solely on the grounds that he is exercising the lien. Where, however, he is exercising a lien adversely to the goods owner, who is seeking possession, and that is his sole ground for denying possession to the owner who would otherwise be entitled to possession but for the lien, he has no such right. In the latter circumstance the exercise of the lien and the retention of possession adversely to the goods owner are treated as being solely for the benefit of the lienee, for which he is not entitled to be reimbursed, even if his costs include those of preserving the goods. Lien is an exercise in self help...The detention is solely for the benefit of the lienee, not the goods owner who is seeking possession, and therefore preserving and caring for the cargo during such detention is also to be treated as solely for the benefit of the lienee. This is so notwithstanding that the goods owner will derive a benefit if and when the detention ceases…
[65] The textbook writers are unanimously of the same view…
d. Absent express agreement to the contrary, "it is a general rule that costs of retaining possession of goods in the exercise of a lien are not recoverable from their owner": Cooke et al, Voyage Charters (3rd Ed. 2007, paragraph 17.37, p. 439.
[66] This is the rule established in Somes, however beneficial it might be (in the words of Cockburn CJ[1]) for the opposite to be true. The value to the lienee of a lien over the goods which are expensive to preserve, and over which his rights of sale are circumscribed, may be emasculated by the costs of preservation. Since the lienee exercising his right to adverse possession nevertheless retains as bailee, and would be liable to the goods owner for loss or damage caused to the goods owner caused by failure to take steps to fulfil those duties, there is one sense in which the costs involved in preservation accrue to the benefit of the goods owner as well as the lienee. But however that may be, to allow the Owners to recover their storage costs as the costs of exercising the lien in this case would involve abandoning the principle in Somes altogether. It is of course always possible for a party on whom a lien is conferred by contract to stipulate in the contract that he should be entitled to recover the costs of exercising the lien. In the absence of such contractual stipulation, the law does not confer such an entitlement…
[75] Under these [voyage charter] provisions the Vessel would not become an arrived ship until she arrived in berth, and only at that time would the charterer's obligation arise under clause 25 to "discharge free of risk and expense to the vessel on customary quick despatch". The Vessel never became an arrived ship at berth because Owners refused to berth, in exercise of their lien. Nor did the demurrage provisions in clause 40 apply. Accordingly Owners claim is a claim for damages, not demurrage, or costs incurred in mitigation of demurrage…
[78] MMO could only be said to have failed to take delivery, if its breach consisted in not paying or securing the GA claim which was what entitled Owners to exercise their lien. To treat such failure as a breach entitling owners to recover the costs of detention as damages involves treating a lien not simply as an option whose exercise is solely for Owners' (and other GA net claimants') benefit, but rather as something whose exercise itself entitles Owners to all losses suffered from having exercised it. This undermines the principle in Somes. If a claim for breach of the obligation which gives rise to the lien can found a claim for damages comprising the costs of detention for the period during which the lien is exercised, the claims for such costs would have succeeded in Somes, The Katingaki and Morris v Beaconsfield.
[79] …Ms Blanchard QC's…argument had to be that although in substance the breach was the failure to discharge the lien, in form this was not because of an obligation to do so, but because only by doing so could MMO fulfil its obligation to take delivery. This is a distinction without a difference. In reality it seeks to turn the exercise of the lien into something which imposes an obligation on the lienor to discharge it. In my judgment this is inconsistent with the nature of the lien as a self help option granted to the ship owner.
[80] The same can be said of the Owners' alternative formulation that MMO's breach was of the implied obligation to do all within its power to enable the Vessel to become an arrived ship. MMO did nothing to prevent the vessel becoming an arrived ship; it wanted to take delivery of the steel coils and was ready, willing and able to do so. The berth was available. What prevented the Vessel becoming an arrived ship was Owners' exercise of the lien. This is only something for which MMO could be said to be liable if MMO was under an obligation to do what was necessary to avoid Owners exercising the lien, ie to pay or secure the general average claim which gave rise to the lien…
[94] Ms Blanchard QC submitted that there could be no distinction between a case where the owner's claim arises under the laytime provisions as one for demurrage and one which arises for breach of the obligation to take delivery. There is, she argued, no commercial or logical distinction to be drawn between the two in this context. Demurrage is a claim for damages for detention, not a claim in debt: President of India v Lips Maritime Corporation (The Lips) [1988] AC 395, 422E-H.
[95] Although this argument has superficial attractions, I am not persuaded by it. There is a relevant distinction between demurrage and damages for detention where the damages claim is premised on a breach of provisions which are not the laytime provisions or other provisions defining the time allowed for loading or discharging…If the shipowner is not in breach of charter, the laytime provisions contain the obligation of which the charterer is and remains in breach so as to entitle the shipowner to demurrage…By contrast, in the absence of operative laytime provisions, the charterer can only be liable for detention if it is caused by a breach of some other obligation he has undertaken, whether expressly or impliedly. The focus is therefore on the effect of the exercise of the lien, if any, on the charterer's obligations. In other words, where demurrage accrues under operative laytime provisions there is a presumptive right to payment unless the delay is caused by the shipowner's breach of charter or default; whereas in the absence of operative laytime provisions, there is a presumptive absence of liability to pay for detention unless the charterers are in breach of some other term of the contract of carriage…Where he has not stipulated for a laytime regimen which establishes an entitlement to be paid for the detention of the vessel, he must be able to point to breach of some other obligation. The charterer's breach can not be created by the shipowner's exercise of his lien."
The parties' submissions
The Somes principle
"Nor does any custom or usage appear to authorize such a claim for compensation, even supposing that a wharfinger with whom goods had been deposited, he being entitled to warehouse rent for them from the time of the deposit, might claim a continuation of the payment during the time he detains them in the exercise of right of lien till the arrears of warehouse rent due for them is paid (see Rex v. Humphery (M'Cl. & Y. 173); there is no ground for a similar claim here, as there was to be no separate payment for the use of the dock while the ship was under repair, and the only claim commences from the refusal to deliver her up. The onus therefore is cast upon the defendants to shew that, by the general law of England, an artificer who, by exercising his right of lien, detains a chattel, in making or repairing which he has expended his labour and materials, has a claim against the owner for taking care of the chattel while it is detained. But the claim appears to be quite novel; and, on principle, there is great difficulty in supporting it either ex contractu or ex delicto. The owner of the chattel can hardly be supposed to have promised to pay for the keeping of it while, against his will, he is deprived of the use of it; and there seems no consideration for such a promise. Then the chattel owner can hardly be supposed to be wrongfully left in the possession of the artificer, when the owner has been prevented by the artificer from taking possession of it himself."
Lord Campbell went on to derive support for his analysis from cases of distraint of animals: they were to be fed and maintained at the distrainor's and not at the owner's cost.
"It is not for us, sitting here judicially, to annex an incident to the law without authority and without precedent, however beneficial it might be. Such a right as is here claimed might be annexed as an incident to a bailment by a usage of trade to that effect, but not otherwise."
Williams J said:
"I am of the same opinion. I cannot assent to Mr Smith's contention that there is any evidence in this case of a contract to give such a right as is claimed. Such a contract may in some cases be inferred from usage of trade; but in the present case there is no more reason for inferring such a contract than in the analogous case of a distress."
Crowder J said:
"There would be no difficulty in making a contract to give it: but here is no such contract."
Bramwell B agreed that there had been no such contract. Watson B said he thought "the analogy between a lien and a distress at common law very strong; and the authorities are decisive that at common law the distrainor had no compensation for the costs of impounding the chattel, or of feeding it if he did so." Channell B expressly referred to the dock charge in the account, but said it was no evidence of a relevant contract. But he also said: "If it had been part of the original agreement that a charge in the nature of stannage or warehouse rent should be paid for the custody of the ship, it might have been an element from which an agreement to continue that payment during the detention might have been inferred."
"It was admitted, that…the person doing those repairs has a lien upon the goods for the amount of the sum charged; but that is confined to a lien for the amount of that sum, and the party doing the repairs cannot add to that lien a charge for the use of his premises while keeping the goods, (in this case the ship), not for the benefit of the shipowner, but for his own. It must be taken to be now decided, that at common law there is no right to such a demand; and the question therefore to be considered here is this: Do the letters which are in evidence, and which constitute part of the case, show that there was a special contract to give such a lien?" [emphasis added]
"If, after that, the shipowners had not taken it away, but had left it an unreasonable time, namely 27 days, occupying the dock, neither the Court of Queen's Bench nor the Court of Exchequer Chamber has expressed an opinion as to whether there might not have been, by natural inference, an obligation on the part of the ship to pay a reasonable sum for the use of the dock for the time it was improperly left there. But the short question is only this, whether Messrs Somes retaining the ship, not for the benefit of the owners of the ship, but for their own benefit, in order the better to enforce the payment of their demand, could then say, "We will add our demand for the use of the dock during that time to our lien for the repairs." The two Courts held, and, as I think, correctly held, that they had no such right."
"The second point which has been made, is, that from the circumstances of this case there is a contract to pay, not merely for the repairs of the ship, but a contract to pay for the hire of the dock for so long a time as the vessel should be there. Now, we are at liberty to draw such inferences as we think ought to be drawn from the facts, and I am clearly of opinion that no such inference can be drawn in this case."
Lord Wensleydale explained that the estimate of 120 to 150 guineas was a mere estimate and that there was never an agreement to pay Ł21 per day for whatever length of time might be taken in making the repairs. There was never any agreement to pay Messrs Somes "the cost of the hire of the graving dock".
"It would be wrong to treat that decision, which was a decision on the facts of one case, [as] decisive of a similar question in the present case where the facts are not in all respect the same. On the other hand, one is entitled to look at the case and see whether there are any significant differences…"
"A person who has a lien upon a chattel for a debt cannot, if he keeps it to enforce payment, add to the amount for which the lien exists a charge for keeping the chattel until the debt is paid."
He continued with his own explanation:
"I know of no authority, and none has been cited to me, for the proposition that a possessory lien can extend to a claim for damages for breach of the contract of repair by the party whose chattel is being repaired. I think the reason why I know of no authority, and why no authority has been cited to me in support of that proposition, is because the proposition is thoroughly bad in law. In my judgment, there is no possessory lein and there never has been a possessory lien, at common law for damages for breach of contract. It is, of course, open to the parties to make any contract they please…"
That may be right, but it seems, with respect, to confuse the question of whether damages are payable with whether there is a lien for such damages. However, where the question was whether money should be paid into court, perhaps the latter question was dominant.
"[62] A lienee has no right to recover expenses incurred by him in maintaining his security: Somes…The Winson…Morris v Beaconsfield Motors…So there could be no right to recover storage charges. But I do consider that EMT would have had a right to exercise a lien for its charges for preparing the goods for delivery to Next…"
"He says that after a certain date the African Associated Agency were holding these goods under a lien and a claim. He says that a person who has a lien cannot claim for expenses of keeping the goods when he is maintaining a lien. Now, I am not at all clear that it is necessary to decide that point, because I am not at all clear that they ever did claim a lien…but even if they did claim a lien, the case that Mr Alchin relies upon is Somes...It was not a case of warehouse keepers who are asserting a lien for charges for warehousing, and though I do not think the point arises, I cannot believe that the principle would apply in a case where the charges in respect of which the lien arises are charges for storage. A charge for storage subject to the assertion of a lien is not the expenses of the claimant for exercising his lien in keeping the goods; it is the contractual cost of storing the goods which he is still performing…"
Those obiter observations seem to me to be correct.
"In the absence of contractual provision to the contrary the shipowner must enforce the lien at his own expense; if he were to land and store the goods, or deposit them with a wharfinger, the cost cannot be recovered from the consignee"
citing Somes as the sole authority at footnote 107. However, the passage continues:
"A shipowner need not land cargo on which he has a lien in order to stop demurrage accruing, provided that the exercise of the lien by retaining the goods on board is reasonable"
citing Lyle & Co v. Cardiff (1899) 5 Com Cas 87 and Smailes v. Hans Dessen & Co (1906) 12 Com Cas 117 at footnote 108. I would observe that Lyle Shipping involved damages for detention rather than demurrage (see below). The footnote continues:
"It would seem that in some cases, if the consignee refuses to take delivery of the goods or to satisfy the lien on them, a master might be justified in carrying the goods back to the port of shipment, and there enforcing his lien against the shipper, on the principle that one who has a lien on goods may do what is reasonable to enforce it, and, if he cannot do so on the spot without incurring expense, may carry the goods to some place where he can: Edwards v. Southgate (1862) 10 W.R. 528."
"In the absence of specific provision in the contract between the shipowner and the owner of the goods, it is a general rule that the costs of retaining possession of goods in the exercise of a lien are not recoverable from their owner and, a fortiori, the lien cannot be exercised in respect of those costs.[6] However, the general rule is riddled with exceptions, the following of which are of importance in the charterparty context:
(1) The costs may be recoverable for breach of the charterparty. The most common example of this is where the laydays are exceeded as a result of the exercise of the lien, and the owner becomes entitled to demurrage or damages for detention. In such a case it is no answer to the claim that the cause of the delay was the exercise of a lien, unless the exercise of the lien was unreasonable.
(2) As a variant of (1) above, the costs may be recoverable as the costs of reasonable mitigation. Again the commonest example is where, in order to mitigate a claim for demurrage or damages for detention, the owner discharges and warehouses the goods in such a way as to maintain his lien. In principle the costs of so doing, if reasonably incurred, are recoverable. This or (4) below is probably the most satisfactory explanation of Anglo-Polish Line v. Vickers.
(3) It could be said that (1) and (2) above should extend to the case where the only relevant breach is the failure to pay the sum for which the lien is being exercised; for example, that an owner exercising his lien for freight should recover the cost as damages (or the cost of mitigating damages) for breach of the obligation to pay the freight punctually. However, such an argument would effectively destroy all vestiges of the general rule, and there is no authority which encourages the view that it would succeed.
(4) As a bailee of the cargo the owner has a right to recover expense incurred by him in safeguarding cargo, provided that the expense is extraordinary in nature, or is incurred after the termination of the adventure by frustration or in consequence of a repudiation by the cargo owner. This right may enable him to recover the costs of landing and storing goods over which he has a lien.
(5) The local law may permit the recovery of certain expenses."
The shipping jurisprudence
"Therefore they did what it was their duty to do. Then comes the question, Can they recover any expenses thus incurred against the owner of the horse? As far as I am aware, there is no decided case in English law in which an ordinary carrier of goods by land has been held entitled to recover this sort of charge against the consignee or consignor of goods. But in my opinion he is so entitled. It had long been debated whether a shipowner has such a right, and gradually, partly by custom and partly by opinions of authority in this country, the right has come to be established…That seems to me to be a sound rule of law. That the duty is imposed upon the carrier, I do not think any one has doubted; but if there was that duty without the correlative right, it would be a manifest injustice"
citing Notara v. Henderson (1872) LR 7 QB 225 at 230-235 and Cargo ex Argos. The jurisprudence can be seen developing, and the rationale is justice. The delay was caused by the owner's unwillingness to take delivery on payment of the expense to which the carriage had given rise. But he was not permitted to take delivery save on such payment. No one seems to have asked if the livery stable's expense had been contracted for. There were of course no laytime or demurrage provisions. But it was obvious that if something untoward occurred which created an expense, and that expense had been caused by the chattel owner's failure to take delivery, if necessary by discharging a lien, then under the contract or in bailment the responsibility rested on the chattel owner, not on the carrier.[8]
"…and the lay days were to count from the time when she was berthed, and notice was given to the charterer. Undoubtedly that would impose by implication upon the charterer the duty of doing any act that was necessary on his part, according to the custom of the port, to enable him to get a berth."
"I do not for a moment deny that he is bound to do whatever is reasonable on his part, with the view of getting the ship berthed at the earliest period that is reasonably possible…"
"There was every likelihood of the dispute being settled in a few days, and it would have been unreasonable, under the circumstances, to have landed the cargo and incurred warehouse rent. The plaintiffs are, therefore, entitled to damages for four days' detention."
"It was argued first of all that none of those expenses at Nobel's could be charged because they were expenses of maintaining the lien; and no doubt these goods were landed at Nobel's for the double purpose: (1) because they must be got out of the ship; and (2) they were held there subject to plaintiffs' lien. And it was said that the general law is that when a man is claiming a lien and holding goods because he has a lien upon them, he cannot charge the cost of holding these goods in order to maintain his lien. No doubt there is authority to that effect. My own view is that the general rule of law is rather more the other way round, and that what is stated as a general rule is rather the exception. As I understand it, if the goods were held in a place for the hire of which under the contract between the parties payment would have to be made, as for instance in a ship or warehouse, then the person who is exercising the lien is entitled to claim payment for the detention of his ship if he holds the goods in the ship or, if less expensive, he clears them out of the ship and puts them into a warehouse and in my opinion the expenses of keeping them in the warehouse. That was done in this case. The goods were reasonably put on this ground of Messrs Nobel's; and in my opinion the consignees are liable for these expenses notwithstanding that the object of putting them on Nobel's land was the two-fold one of getting them out of the ship and maintaining the lien."
"Their Lordships, in coming to this conclusion, may well quote the language of that great judge, Story J., in United States v. Wilder (1838) 3 Sumn. 308). That was a case of general average. He quoted observations of Lord Stowell in The Waterloo (1820) 2 Dods. 433 on the question of salvage, which Lord Stowell described as "a right otherwise universally allowed, and highly favoured in the law, for the protection of those who are subjected to it; for it is for their benefit that it exists under that favour of the law. It is what the law calls jus liquidissimum, the clearest general right that they who have saved lives and property at sea should be rewarded for such salutary exertions (2 Dods. 435-6)." Story then said of the right to general average (3 Sumn. 318): "If there ever was a case which ought to be settled by a court of justice, upon principles of right and liberality, this is precisely that case. No court of justice ought to decline to enforce it, unless there be clear, definite and uncontrovertible prohibition against the exercise of it.""
The question, or one of the questions, in this case is whether Somes provides that clear, definite and uncontrovertible prohibition against what Ms Blanchard submits, and the arbitrators have found, is the justice to be stated between these parties.
"2. As a matter of fact, the exercise of a lien will inevitably involve the lienor [sc the lienee] in the obligation to take proper care of the property liened. 3 Expenditure on the preservation and retention of the property will inevitably have a dual effect: (i) it enables the [lienee] to preserve his possession, to preserve his lien and to fulfil his duties as bailee; it benefits the owner of the goods in the sense that the goods are preserved and looked after rather than being exposed to deterioration or loss".
"My Lords, the extent to which any possessory lien that a salvor would be entitled to exercise at common law is capable of surviving, or is modified by, the provisions of clauses 4 and 5 of the Lloyd's open form raises difficult and hitherto undecided questions of law into which, in my view, it is not necessary for this House to enter in the instant case – and it would be unwise for your Lordships to attempt to do so. The only reason why the cargo owner upon the failure of its main propositions sought by this subsidiary proposition, to reach some tabula in naufragio juridiciabile was in order to avail itself of the principle which it contended was laid down by this House in Somes v. Directors of British Empire Shipping Co. (1860) 8 H.L.Cas. 338, to the effect that, where a person entitled to a possessory lien over goods incurs expenses in maintaining possession of them in the exercise of his right of lien and preserving in the meantime their value as security for the owner's indebtedness to him, he cannot recover such expenses from the owner. That case is, in my view, authority for the proposition that, where a lienee remains in possession of goods in the exercise of his right of lien only (i.e., one who has refused a demand by the lienor for redelivery of the goods with which, in the absence of the lien, the lienee would be under a legal obligation to comply), he cannot recover from the lienor loss or expenses incurred by him exclusively for his own benefit in maintaining his security as lienee and from which the lienor derives no benefit as owner of the goods. I would not seek to suggest that this authority has become outdated for the proposition that was then laid down; but I would deny that it is authority for anything more and, in particular, for the further proposition that expenditure necessary for the preservation from deterioration from which the owner does derive benefit is irrecoverable, where such expenditure is made by a bailee at a time before possession of the goods has been demanded of him by the owner and his only right to retain lawful possession of them rests upon his own election to continue in possession, after such demand, in the exercise of the rights of lienee.
However that may be, the short answer to the lien point in the instant case is that on the facts it never arose…"
"These are difficult questions and it would not be right for me to consider them further in this judgment unless they arise for decision in this case. I have reached the clear conclusion that they do not."
"The charterers' submission predicates that there has been a refusal by the shipowners to discharge in accordance with the charter-party. The right to exercise a lien is given expressly by the charter-party itself. It can only operate as a qualification of the undertaking to give discharge. By exercising the right, the shipowners in my judgment do not refuse to give discharge in accordance with their undertaking. Rather, they rely, as they are entitled to do when freight or demurrage is due and unpaid, upon the qualification in their favour of what would otherwise be their obligation, which in the circumstances frees them from it. Therefore, in my judgment, the case is not one where the shipowners have refused to perform their undertaking to give discharge, because the obligation itself is qualified, nor where they have done anything equivalent to removing the vessel from the discharging berth.
For these reasons, by reference to Scrutton and the authorities there cited, I hold that demurrage does not cease to accrue merely be reason of the shipowners' reasonable and lawful exercise of their lien."
"[18] Strictly speaking, this [the decision on clause 13] makes it unnecessary to address any of the other legal bases put forward by the owners in support of their claim. But I propose to deal with the question whether the owners were also entitled to succeed at common law as non-contractual bailees of the cargo after the withdrawal of the vessel…On the whole, one would expect a coherent system of law to produce a consistent answer under both heads, and in my judgment it does.
[19] Unlike many civil law systems, English law does not allow a general right of recovery for benefits conferred on others or expenses incurred in the course of conferring them. In the pejorative phrase which has become habitual, there is no recovery for benefits "officiously" conferred. In Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, 248 Bowen LJ said:
"The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure. Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will."
[20] While this remains the general principle, the exceptions have over the years become more important than the rule. The particular feature of the present case which makes it difficult to apply the general rule is that the original bailment of the cargo occurred under a previous contractual relationship. The bailment was therefore consensual, albeit that after the withdrawal of the MT Kos from the time charter, it was no longer contractual. It is common ground, and clear on the authorities that in these circumstances, the owners had a continuing duty to take reasonable care of the cargo, which they could not escape except by retaining it until arrangements were made to discharge it. But the owners had in no sense officiously put themselves in this position, nor had they (as the charterers put it in argument) "voluntarily assumed" possession of the goods."
Question 2: discussion and decision
Conclusion
Lady Justice Arden:
Lord Justice Patten:
Note 1 In Somes in the Exchequer Chamber, (1859) El Bl & El 367, cited at para [46] of Popplewell J’s judgment [Back] Note 2 Counsel for the shipowner, Mr Blackburn, had mentioned the item of dock dues in the estimate in arguendo, but he submitted: “It is a special charge for the use of an expensive tool, not a rent for a place of deposit”. He also submitted: “A bailee has, by law, a lien for his skill and labour expended on a chattel bailed to him for that purpose. He has not, by law, a lien for any other charge” (at 361) [Back] Note 3 No doubt it was typical to keep a tailor waiting for the payment of his bill. [Back] Note 4 Not unlike the case put by Lord Cranworth in Somes [Back] Note 5 See nowChitty on Contracts, 31st ed, 2012, at para 33-090 [Back] Note 6 Again, citing Somes as the sole authority. [Back] Note 7 In ENE Kos 1 Ltd v. Petroleo Brasileiro SA (No 2) [2012] UKSC 17, [2012] 2 WLR 976 Lord Sumption said at para [21]: “The case appears to have been decided on the footing that the contract of carriage was at an end when the Argos left Le Havre for London, either because the contractual service had been completed or because the contract was frustrated at Le Havre.”Sed quaere: certainly the ground of frustration was expressly rejected, see at 161. [Back] Note 8 In ENE Kos (see footnote 7) Lord Sumption said at para [22] that “As inCargo ex Argos, the case was decided on the footing that the contract had come to an end, in this case on the day after the arrival of the horse at Sandy, when the performance required of them was completed.” [Back] Note 9 The fact that damages for detention and not demurrage were involved was recognised by Evans J in The Boral Gas [1988] 1 Lloyd’s Rep 342 at 348. [Back]