Smart claims for bill of lading freight by owners.

If an owner’s bill of lading incorporates the freight provisions of a time charterer’s voyage charter, can owners intervene to require payment of the freight to themselves rather than to the time charterer? That was the issue recently before Butcher J in Alpha Marine Corp v Minmetals Logistics Zhejiang Co Ltd (MV Smart) [2021] EWHC 1157 (Comm) (05 May 2021).


Claim were made by owners against charterers in respect of the loss of the vessel for breach of the safe port warranty. the Tribunal found that the Charterers had provided a safe port warranty in respect of Richards Bay and that there were some shortcomings in the running of the port. However, the Master had been negligent in his handling of the Vessel and it was this that caused the grounding of the Vessel. Owners had issued bills of lading which stated ‘freight as per charter’.  After the vessel was lost the Owners gave notice to the bill of lading holder, the voyage charterer to pay full freight to them. At that time only a sum in respect of bunkers was due to Owners.  Charterers claimed damages in respect of losses sustained as a result of owners’ intervention in respect of freight due under the bill of lading through the incorporation of the terms of the voyage charter. They also claimed in tort on the basis of procuring breach of contract by the voyage charterer and/or knowingly and/or unlawfully interfering with the Voyage Charter. The Tribunal found that Owners were not entitled to revoke Charterers’ right to obtain the bill of lading freight or to direct it be paid to the Owners. This is because the Charterparty contained an implied obligation that Owners would not revoke unless hire and/or sums were due to them under the Charterparty

On appeal, Butcher J considered three possible terms constraining owners’ exercise of their rights to intervene to claim freight under the bill of lading. First, the “all freight” implied term whereby if the Charterers were in default of their obligations under the Charterparty, then the Owners would be entitled to collect the entirety of the freight, even if it exceeded the amount of the Owners’ claim against the Charterers arising out of their default. Second, “All Freight (Sum Identified) Implied Term”) by which the Owners were not entitled to revoke the Charterers’ authority to collect any freight unless a sum was due to the Owners under the Charterparty and the relevant sum was identified at the time of any revocation of the Charterers’ authority; and (3) the “Dollar for Dollar” Implied Term whereby the Owners were only entitled, in the event of a default by the Charterers, to revoke the Charterers’ authority to collect freight in respect to an amount up to, but no more than, the amount due from the Charterers under the Charterparty.

Butcher J rejected the implication of any term.  Owners’ duty to account to the charterer for any excess in the amount of freight collected over the amount due under the charterparty meant that the present charterparty, or other time charters in similar form, did not lack commercial or practical coherence without an implied term restricting the owners’ right to intervene.  If owners claimed freight in excess of sums due to them under the time charter the owners would have to account for the balance to the time charterers, and that was the charterers’ protection.

The Award was set aside insofar as it awarded damages for breach of the implied term found by the Tribunal; and the matter was remitted to the Tribunal for reconsideration of the Charterers’ freight counterclaim on the alternative Tortious Basis, having regard to this judgment.

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