The limits of bill of lading holder liabilities to the carrier. Paying for stevedores doesn’t necessarily mean you are liable for delay in discharge.

In Sea Master Shipping Inc v Arab Bank (Switzerland) Ltd [2020] EWHC 2030 (Comm), HH Judge Pelling QC presided over an interesting case regarding the implied discharge obligations, under bills of lading, of receivers and banks. Parcels of soya bean meal were discharged in Lebanon in February 2017 under two switch bills which incorporated the terms of a voyage charter. The voyage charter provided for ‘charterer’ to pay demurrage, but recovery from charterers was stymied by the fact of their insolvency. So what about the bill of lading holder/s?  Clearly there was no obligation on the bill of lading holder to pay demurrage (see The Miramar), and the tribunal found accordingly. Owners advanced an alternative claim based on two implied terms, that the Bank and/or the Receivers would: take all necessary steps to enable the cargo to be discharged and delivered within a reasonable time; and/or discharge the cargo within a reasonable time. The tribunal found against owners on this and the implied terms claim was the subject of an appeal.

HH Judge Pelling QC agreed with owners that the first issue to be resolved was whether, as a matter of construction of clauses 10 and 11 of the Voyage Charter, the “Charterers/Receivers” were responsible for performing the task of discharging the cargo from the vessel. Clause 10 stated that “…Cargo is to be discharged free of expense to the Vessel…”.  Clause 11 provided “…Stevedores at discharging ports are to be appointed and paid for by the Charterers/Receivers”. He concluded that although charterers/receivers were to pay for discharging the cargo, that did not mean that they were responsible for discharging. This was made clear by the additional words of cl. 11: “In all cases, stevedores shall be deemed to be the servants of the Owners and shall work under the supervision of the Master.” These words made it clear that control of the exercise remained with the master on behalf of the owner, the default position at common law. This was further confirmed by cl.46 of the incorporated charter, which provided that:

“Stevedore’s damages, if any to be settled directly between owners and stevedores but charterers to assist Owners at their utmost. Master to notify, if possible, these damages in writing latest 48 hours after occurrence to Stevedores but Owners to remain ultimately responsible to settle same with the stevedores.”

This made sense only in the context of the appointment of stevedores by the receiver or charterer where the Owner remained responsible for discharge.

Turning to the second implied term – to discharge the cargo within a reasonable time – argued for by owners, the Judge concluded that the carriage contract did not lack commercial or practical coherence without such an implied Term. As between the Owner and the Charterer, the Owner chose to accept the risk of Charterer’s insolvency. To imply the Second Implied Term would be to imply a term that contradicted the express terms of the relevant agreement, the effect of which was, as found by the Tribunal, that “… demurrage should be payable by Agribusiness, not by the Bank or the Receivers”.

The Judge then rejected owners’ first suggested implied term – to take all necessary steps to enable the cargo to be discharged and delivered within a reasonable time. Owners contended at least implicitly that delivery was a collaborative process, and sought to imply the term relying on the principle summarised by Lord Blackburn in Mackay v. Dick (1881) 6 App. Cas. 251 at 263:

“I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.”

However, neither delivery nor discharge depended on collaboration. Delay in claiming delivery within a reasonable time would lead to the consequences set out by Males J in The Bao Yue [2015] EWHC 2288 (Comm) [2016] 1 Lloyds Rep 320:

“It has been established for many years that if the bill of lading holder does not claim delivery within a reasonable time, the master may land and warehouse the cargo; that in some circumstances it may be his duty to do so; and that as a correlative right, the shipowner is entitled to charge the cargo owner with expenses properly incurred in so doing …[49] ”

The only collaborative element under this contract of carriage was the receiver’s obligation to appoint stevedores by operation of clause 11. However that did not make the implication of the the suggested implied term necessary or reasonable because (a) the express obligation to appoint was absolute in its terms and (b) there was an express agreed contractual mechanism contained in clause 20 of the Voyage Charter terms that applied in the event that discharge is delayed by the failure by the defendants to appoint stevedores. Even if there were an absolute obligation on the receivers to make a berth available, that did not lead to implying such a wide ranging general term. Such a duty would require only a very narrowly expressed implied term that required the receivers to make a berth available and it seems probable that a failure to do so would be subject to the demurrage machinery within the Contract of Carriage, although no decision was necessary on this issue.

Accordingly, owners’ appeal was dismissed.

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