Dry Bulk Handy Holding Inc v Fayette International Holdings Ltd & Anor

The claimants are Dry Bulk Handy Holding Inc (“DBHH”) , the owners of the “Bulk Chile”, which carried cargo from Odessa to Jakarta in February and March 2011, and Compania Sud Americana de Vapores SA (“CSAV”), who chartered her from DBHH. The intermediate charterers, Korea Line Corporation (“KLC”), have failed to pay hire and are apparently insolvent, and the claimants bring claims against Fayette International Holdings Ltd (“Fayette”), who chartered the vessel from KLC, and Metinvest International SA (“Metinvest”), who chartered her from Fayette. The claims relate both to a period between 18 January 2011 and 26 February 2011, when the vessel was hired to KLC, and to a period between 26 February 2011, when the vessel was withdrawn from KLC’s service, and 10 March 2011, when the claimants accept that the vessel was redelivered to them after discharge of the cargo. The claims are:

There are no issues for determination between DBHH and CSAV, who were both represented by Mr John Bignall, or between Fayette and Metinvest, who were both represented by Mr Dominic Happé The primary facts are largely uncontroversial, and no witnesses were called at the trial. The evidence of fact comprised documents in an agreed bundle that were in evidence under CPR32PD27.2. The parties had permission to adduce expert evidence about charter rates for a bulk carrier such as the “Bulk Chile”, but they reached agreement that the applicable daily hire rate was $23,000 and adduced no evidence about that. They also had permission to adduce evidence of Korean law concerning the interpretation and application of orders made in the 4^th Bankruptcy Division of the Seoul Central District Court (the “Seoul Court”) about the “rehabilitation” of KLC. The evidence of Korean law comprised three expert reports of Korean attorneys, two of Mr J H Choi, the claimants’ witness, and one of Mr Chul-Man Kim, who gave evidence for the defendants: they did not give oral evidence.

There might be some difference between the parties about the exact sums recoverable by the claimants if their various claims succeed. I did not hear submissions about these issues, and, as I told the parties during the trial, in this judgment I shall not determine them. Further, Mr Bignall acknowledged that in some circumstances the claimants will have to account to others in respect of sums recovered under this judgment, but I was not asked to determine their obligations in that regard.

DBHH, as owners, and CSAV, as charterers, entered into a time charterparty dated 25 January 2007 and on the 1946 New York Product Exchange (“NYPE”) form of the “Bulk Chile”, which was then under construction in Japan. DBHH also entered into a charterparty of her with KLC (the “KLC charterparty”) dated 7 June 2007. The commercial reason that the charterparty was made by DBHH, rather than CSAV, is not explained in the evidence, but by a “Side Agreement” dated 13 January 2009 DBHH and CSAV agreed that DBHH entered into it “in its own name and for the account of” CSAV. The KLC charterparty was also on the 1946 NYPE form. The lien claims are based on clause 18, which provided as follows:

“That the Owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this Charter, including General Average contributions, and the Charterers to have a lien on the Ship for all monies paid in advance and not earned, and any overpaid hire or excess deposit to be returned at once. Charterers will not suffer, nor permit to be continued, any lien or encumbrance incurred by them or their agents, which might have priority over the title and interest of the owners in the vessel.”

The KLC charterparty also included the following provisions:

On 19 January 2011 KLC entered into a trip charterparty (the “trip charterparty”) with Fayette that was recorded in an email “recap”: there was apparently no more formal contractual document. It was for a trip of about 45 days (without guarantee) with a cargo including steel slabs and/or steel plates between the intended load ports of Sevastopol and Odessa and the intended discharge ports of Jakarta, Klang and/or Kuantan. The daily hire was $24,000 and was payable 15 days in advance (with 3.75% address commission). The recap provided “O[ther]wise as per Owners BTB [back to back] as attached logically amended in accordance with the above …”: the KLC charterparty was attached, and so the trip charterparty incorporated clause 18 of the 1946 NYPE form.

Also on 19 January 2011 Fayette entered into a voyage charterparty (the “voyage charterparty”) with Metinvest on the Gencon form for the carriage of 47,000 mts of steel products from Sevastopol and Odessa to Jakarta and Klang. The freight was $44.00 pmt for cargo carried from Sevastopol (or Avlita) to Jakarta and $61.04 pmt for cargo carried from Sevastopol or Odessa to Klang: box 13. Box 14 of the standard Gencon form reads: “Freight payment (state currency and method of payment; also beneficiary and bank account) (Cl 4)”, and it was completed, “See cl 31”. Clause 4 stated that “The freight at the rate stated in box 13 shall be paid in cash calculated on the intaken quantity of cargo” but otherwise the standard wording of clause 13 was deleted and the words “(See cl 31)” were added. The rider to the voyage charterparty provided (by clause 30) that bills of lading were to be marked “Freight Prepaid”, and the “Charterers are authorised to issue Bill(s) of lading on behalf of master, subject freight payment”. By clause 31 freight was to be paid within two banking days of the completion of loading, and bills of lading were to be marked “freight prepaid”, and were “to be released after the receiving by the Owners Charterers’ banking SWIFT”.

There was also in evidence a Contract of Affreightment between Fayette and Metinvest dated 20 July 2009. It recited that Metinvest wished to use Fayette’s services to comply with “its shipment and logistic obligations under its commodities sale contracts including but not limited to fixing vessels, arranging transhipment and forwarding of cargoes” and that the contract should apply to all commodities shipments except iron ore. Clause 9 provided as follows:

“Freight for each fixture shall be advised by Fayette upon nomination of the proposed carrying vessel. Freight shall be paid in full and without deduction within three (3) banking days of receipt by Metinvest of Fayette’s invoices. Metinvest shall provide Fayette with a copy SWIFT of such remittance within one day thereafter. Freight shall be deemed earned on loading and shall be due to Fayette non-returnable, vessel and/or cargo lost or not lost.”

There was no specific evidence that this Contract of Affreightment applied to the carriage of the goods with which these proceedings are concerned. Mr Bignall submitted that it should be disregarded, but I infer that it is applicable to the carriage. It was stated to be “concluded for an unlimited period” subject to termination on notice, and there is no reason to suppose that notice had been given. The provision in clause 9 about when freight should be paid was displaced by clause 31 of the voyage charterparty (because it was an agreement specific to this carriage and it displaced the more general provision), but as between Fayette and Metinvest the freight was “deemed earned on loading” and was “non-returnable, vessel and/or cargo lost or not lost”.

Three bills of lading in Congenbill 1994 form were issued in respect of the cargo. They were signed by Fayette as agent for and on behalf of the master, and it is not disputed that they are Owners’ bills. The shippers were Metinvest and the consignees were “to the order of” different banks. They all stated “Freight payable as per Charterparty dated 19.01.11”: the parties agree that this refers to the voyage charterparty. On the reverse sides of the bills there was the standard Congenbill term:

“All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.”

The bills also stated on their face “freight prepaid”, but in fact it had not been. No freight was paid before 12 April 2011 (if then: see para 27 below).

The vessel was delivered to KLC on 13 January 2011. On 10 January 2011 DBHH had issued an invoice (no 07/00001) to KLC for payment of hire for the period from 02.48 on 18 January 2011 to 02.48 on 2 February 2011 in the sum of $369,687.50, together with a charge of $3,500 for cleaning holds, a total of $373,187.50. There is no specific evidence whether or not it was delivered to KLC, and Mr Happé invited me to conclude that the claimants have not proved that it was (or that it had been by 5 February 2011). If it matter, I infer that it was delivered shortly after it was issued: it is inherently more probable than otherwise that, having prepared the invoice, DBHH would have delivered it. Under clause 5 of the KLC charterparty, hire of $373,187.50 accrued due on 18 January 2011 (and no point was taken by the defendants about whether the charge of $3,500 accrued due at a different time). KLC did not pay it, and there is no suggestion that this or any other default of KLC was due to an oversight or for another reason covered by the second sentence of clause 30 of the KLC charterparty. On or about 26 January 2010 they sent an email apologising for not making payment. They indicated that they would remit it on 27 or 28 January 2011, but they did not do so. On 28 January 2011 DBHH issued another invoice, (no 07/00005) for hire from 02.48 on 2 February 2011 to 02.48 on 17 February 2011 in the sum of $369,687.50. This accrued due on 1 February 2011 because of the provision in clause 30 of the KLC charterparty that, if time hire became due “outside normal office hours”, payment should be made on the last banking day preceding the date on which the hire became due (and it was not disputed that 2.48 on 2 February 2011 was “before normal office hours”). This invoice too was not paid.

On 31 January 2011 the vessel was delivered into service under the trip charterparty.

By an email at 12.43 on 1 February 2011 and a fax at 12.58 on 1 February 2011, DBHH’s managers, C Transport Maritime SAM of Monaco (“CTM”), sent to Fayette and Metinvest respectively a document called “Notice of Lien” (to which I shall refer as the “First Notice”). There are issues between the parties about whether it was a valid and effective notice, and I shall set it out in full:

“This is [CTM], Managers acting for Dry Bulk Handy Holding Inc., the Disponent Owners (“Owners”) of the m/v “BULK CHILE” (“the Vessel”) pursuant to the above charter party [there was no charterparty mentioned “above”] by which the Vessel was time chartered to Korea Line Corporation (KLC).

By the terms of the charter party, hire was payable punctually in advance to Owners. In breach of charter, KLC have failed to pay hire due and owing to Owners.

The charter expressly provides that Owners have the right to a lien for any amounts due to them under the charter. The sum of at least US$742,875 is due and owing to Owners as at the date of this notice. In the circumstances, all addressees of this message are kindly required to treat this message as Notice of Lien over any balance of freight(s) and/or hire(s) due under any charters, bills of lading, or other contracts of carriage relating to the voyage(s) and cargo(es) covered by the above bills of lading.

By this Notice of Lien, we therefore request that you now:

1.

Confirm to us the amount of freight(s) and/or hire(s) due from you under any charters, bills of lading, or other contracts of carriage relating to the voyage(s) and cargo(es) covered by the bills of lading; and

2.

Arrange payment of all such freight(s) and/or hire(s) in your hands directly to our account when due, as below:

Dry Bulk Handy Holding Inc.

[Details of an account at HSBC Monaco were set out.]

In the event that sums are paid into the account which amount to more than the sums due to Owners, the monies shall be held in trust pending further accounting.

Please take note that in the event you ignore the terms of this Notice of Lien and make payment of freight(s) and/or hire(s) to anyone other than us on behalf of Owners after the time and date of this fax and email, Owners reserve the right to recover such freight(s)/hire(s) from you and you run the risk of being required to pay twice.

If you require further clarification on the effect of this Notice of Lien, or the sums due to Owners, you are urged to contact Giorgio Ferrari of this office before you take any steps which contradict its terms.”

I shall refer in this judgment to the two numbered paragraphs in the First Notice as the “first request” and the “second request” respectively.

On 2 February 2011 Fayette confirmed receipt of the First Notice and stated that they were prepared to remit “future hire-payments” to DBHH subject to KFC confirming that they agreed to this procedure, receipt of the KLC charterparty and proof of the outstanding hire that DBHH claimed was due to them. In response DBHH sent to Fayette copies of the two invoices. (I infer this because, although the covering email refers attaching “a copy of the latest hire invoice”, it apparently had two attachments, one with the reference “07.00001”.) DBHH did not send a copy of the KLC charterparty because, they said, it was confidential as between them and KLC and they required KLC’s permission to reveal its terms, but they informed Fayette that it contained “an express lien provision”.

On 4 February 2011 the vessel stated to load cargo at Sevastopol, and on 6 February 2011 she completed loading her cargo at Odessa. The three bills of lading were issued on 8 February 2011, although they stated that they were issued on 4 February 2011, two with reference numbers 1BC.AV and 2 at Sevastopol and the third with reference number 1SO at Odessa.

On 5 February 2011 DBHH sent to Fayette and Metinvest another copy of the First Notice under cover of what I shall call the “Second Notice”. The Second Notice was headed “Notice of Lien on Cargo”, and was as follows:

“Disponent Owners refer to their notice of lien dated 1^st February, copy below.

Please take note that that lien is extended to cargo now loaded on board m/v BULK CHILE to be carried under bills of lading numbers 1BC.AV and 2 and we require you, as in the case, of the earlier notice of lien to provide us with the information at numbered paragraph 1 and to comply with the request made at numbered paragraph 2.

Please take note that in the event you ignore the terms of this Notice of Lien disponent owners reserve their rights, inter alia, to refuse to deliver the cargo to the receivers of it at the port of destination until you have fully complied with its terms.

If you require further clarification as to the effect of this Notice of Lien, or the sums due to disponent owners, you are urged to contact Giorgio Ferrari of this office before you take any steps which contradict its terms.”

On 18 February 2011 DBHH sent KLC notice that they would withdraw the vessel from KLC’s service, unless KLC paid the hire that they owed within four banking days of receipt of the notice. (The details of the notice are curious: it is headed by reference to hire of $373,187.50 due on 17 February 2011, and refers to KLC owing $742,875 by way of previous hire instalments due on 2 February 2011 and 18 February 2011. Presumably the reference to 18 February 2011 was an error for 18 January 2011. The sum of $373,187.50 is curiously the amount of the invoice of 10 January 2011, including the charge for cleaning. But these details were not explored in submissions and there is no dispute that the notice and subsequent withdrawal of the vessel were valid.)

On 19 February 2011 DBHH sent Fayette the following email:

“Please be advised that KLC have failed to pay the latest instalment of hire due to owners. Owners have served KLC with an anti-technicality notice requiring KLC to rectify the position within 4 banking days, failing which the vessel will be withdrawn from KLC’s service. If KLC do not comply and pay the outstanding hire by 24 February, the vessel will be withdrawn from KLC’s service. In the event that the vessel is withdrawn from KLC’s service, sub-charterers should rest assured that discharge of the cargo presently aboard the vessel will take place in the usual way, provided that sub-charterers comply fully with owners’ notices of lien already served on them. In that event, owners will also require sub-charter hire from the date of withdrawal to be paid direct to CSAV (sub-charterers are aware that CSAV are the principals of DBHH) and will require sub-charterers to confirm to CSAV that they will do so.

To be clear, in the event the vessel is withdrawn from KLC’s service, owners will cooperate to ensure matters proceed smoothly but will also expect full cooperation from sub-charterers to avoid delays and problems. Owners trust charterers fully understand their position.”

In their reply on 23 February 2011 Fayette did not accept DBHH’s offer made on 19 February 2011, but wrote as follows:

“Fayette note that DBHH have served a notice of withdrawal on KLC. If not complied with, DBHH indicate this will provide them with the right to withdraw the vessel from KLC, which right Fayette understand DBHH intend to exercise.

Fayette also note DBHH’s confirmation that they will comply with their bill of lading obligations to deliver the cargo on board the vessel to the destinations stated in the bills of lading, subject to compliance with the lien notices served.

The validity of the lien notices served remains in dispute.

Unless/until the validity of DBHH’s liens is established, Fayette’s position must remain that they are willing and able to pay hire, subject to being provided with a mechanism by which they can safely do so.

In this regard, Fayette have previously suggested that the parties set up an escrow account into which Fayette’s hire can be paid. Such hire can then be distributed pursuant to agreement, arbitration award etc. Now that a court receiver has been appointed to run KLC’s affairs, Fayette encourage the parties to make the necessary arrangements.

In the meantime, DBHH can rest assured that hire due to date and any hire falling due in the future, will not be paid to KLC, while the dispute between DBHH and KLC remains unresolved.”

On 23 February 2011 DBHH again wrote to Fayette about the notices of lien as follows:

“Owners refer to their notices of lien dated 1 February 2011 and 5 February 2011.

Owners require Fayette and Metinvest Holding to advise them by return the amount of freight intercepted by their notices of lien on freight and cargo and for them to arrange for that sum to be paid forthwith without deduction to the following account.

…

Owners would remind Fayette and Metinvest Holdings of two things. First, the liens on freight and cargo have intercepted freight, not hire otherwise payable to KLC. Unlike the aforementioned hire, this freight would not be payable to KLC in any event and therefore the developments in Korea concerning KLC are irrelevant as regards this freight. Therefore the freight must be paid forthwith to owners. Second, as has already been pointed out in the notice of lien dated 1 February, if you ignore the terms of the liens and do not pay the freight to owners, owners will exercise their right to recover such freight from you and you run the risk of being required to pay the freight twice.

Owners repeat what they said in their message of 18 February about the need for full cooperation in this to avoid problems with discharge of cargo.”

The reference to a message of 18 February 2011 was apparently to that sent (at 1.38am) on 19 February 2011. Although the email refers to the Owners “reminding” Metinvest, as well as Fayette, of the matters stated, Mr Bignall acknowledged that there is no evidence that it was sent to Metinvest or that Metinvest received it, and he did not contend that it was. I find that it was sent only to Fayette.

On 26 February 2011 DBHH withdrew the vessel from KLC’s service. On 1 March 2011 in an email headed “m/v Bulk Chile – redel[iver]y notice” Fayette advised DBHH of the vessel’s itinerary, asked that their email be taken as five days’ redelivery notice and stated “The chrts will inform owrs immediately if the vsl’s schedule is changed”. It is clear, and was not disputed, that Fayette were referring to themselves as the “charterers” and to DBHH as “owners”.

Mr Happé submitted that there is no evidence that Fayette knew that the vessel had been withdrawn from KLC’s service when they sent the redelivery notice at 14.17, but I reject that submission. At 11.48 Fayette had asked that their operations department send a message to KLC that DBHH had informed them that the vessel was withdrawn, and asked whether the information was correct. I accept that there is not evidence whether their operations department sent the message and received a reply before 14.17, but the inference is that Fayette understood that the vessel had been withdrawn from KLC’s service. I add that by this time both parties had engaged London solicitors, and at 10.34 on 1 March 2011 Hill Dickinson on behalf of the claimants (or one of them) had told Eversheds on behalf of the defendants (or one of them) that $945,016.88 was owed by KLC (that sum apparently being the total of $373,187.50 and $369,687.50 together with $228,151.52 by way of hire from 17 February 2011 to 26 February 2011).

On 3 March 2011 DBHH asked Fayette by email that they be given up-dated advice about the “vessel’s prospects and best [estimated time of completion] from Jakarta”. On 5 March 2011 Fayette sent the master an email stating that they understood that the vessel had stopped in her approach to Jakarta on DBHH’s instructions, and asked him urgently to contact the owners so as to resume the voyage. Later that morning they sent this message to the master:

“Kindly asking you to proceed to the port and fulfil the contractual obligations to discharge the cargo of value more than 23 MIO USD.

Pls note that chrtrs irrevocably confirmed to the owners that all hire due to the vessel under their CP be transferred to the owners DBHH.

DBHH also aware that the subject of the amount in dispute (which is less than 1pct of cargo value) is at owners/chrtrs solicitors hands and be sorted out upon ships redelivery. In order do not complicate the issue even more, pls proceed to the port and fulfull the contractual obligations.”

Again Fayette referred to themselves as “charterers” and to DBHH as the “owners”. There is no document that could be described as an irrevocable confirmation such as Fayette describe, or any other evidence of such confirmation. It is unclear on what basis Fayette could have calculated that the amount in dispute was less than 1% of the total value of the cargo - as I have said, on 1 March 2011 Hill Dickinson had advised Eversheds that $945,016.88 was owed by KLC - but nothing turns on that.

Also on 5 March 2011 Fayette sent this email to the master: “We instruct you once again to proceed to the port and fulfil the contractual obligations to discharge/release cargo to receivers”. They asserted a reservation of rights, and requested, “Pls pass this msge to head owners”. Where in both messages of 5 March 2011 they referred to “contractual obligations”, Fayette probably had in mind the bills of lading contracts, but I consider this further below at para 74.

On 9 March 2011 Fayette sent an email to the vessel, asking that it be passed to “all concerned parties”, advising that the vessel’s estimated time of departure from Jakarta was 10 March 2011 and requesting that the email be taken as one day’s redelivery notice. Again they stated that “Should there be any changes, then charterers will inform ow[ner]s immediately”.

On 12 April 2011 Metinvest paid to Fayette $2,591,291.99 “According to [Fayette’s] instructions”, and the payment reference mentions the “Bulk Chile”. The debit advice evidencing this payment was disclosed only during the trial. It was said by Mr Happé to represent the payment of freight. I cannot myself reconcile the amount of the payment to the freight due under the voyage charterparty. No explanation was given for this document being disclosed so late, no other documents about the payment have been disclosed and there is no other evidence about the circumstances in which it was made. Had anything turned upon this, I should have invited further submissions and possibly required further disclosure. However, it suffices to say that there is no evidence that Metinvest paid freight before 12 April 2011, and it was not suggested that they did so.

As I have said, proceedings (the “Korean proceedings”) have been brought in the Seoul Court concerning the rehabilitation of KLC, a procedure described by Mr Kim as “similar to the US Chapter 11 bankruptcy proceedings since its goal is to rehabilitate insolvent debtors by restructuring their debts pursuant to a rehabilitation plan approved by creditors and the court”. They were brought under the Debtor Rehabilitation and Bankruptcy Law (“DRBA”) of Korea and the petitioner in the proceedings was KFC.

By an order made on 26 January 2011 (the “Comprehensive Stay Order”) the Seoul Court ordered that KFC should not repay or provide security for any debts or monetary obligation incurred in connection with any event that occurred on or before 26 January 2011, and that “no creditor of the Petitioner shall do judicial enforcement, prejudgment attachment, injunction, or foreclosure based on security interests by auction proceedings against any property of the Petitioner in connection with any rehabilitation claim or security interest such creditor may hold against the Petitioner until the Court issues a decision commencing or denying that commencement of the rehabilitation proceedings under the [DRBA]”.

On 15 February 2011 the Seoul Court decided that the rehabilitation proceedings should commence at 10.00 am that day and appointed receivers. They set a timetable for creditors to submit their claims and other matters.

On 25 February 2012 Norris J, sitting in the Companies Court of the Chancery Division of this Court, made an order that the Korean proceedings be recognised as a foreign main proceeding in accordance with the UNCITRAL Model Law on cross-border insolvency as set out in the Cross-Border Insolvency Regulations 2006 (the “Model Law”) and that no step might be taken to enforce any security (as defined by Article 2(n)(i) of the Model Law) over [KLC’s] property …”, except in circumstances irrelevant for present purposes. The definition of “security” provided that the term includes “any mortgage, charge, lien or other security”.

I was told by Mr Happé that a claim of $2.6 million by DBHH has been admitted in the rehabilitation programme of KLC pursuant to the Korean proceedings and this is to be paid over 10 years. Mr Bignall had not had proper notice of this information and his (hasty) instructions suggested that it might be inaccurate or at least incomplete. Any such payment is irrelevant for present purposes, and I say no more about it.

Although this was not the order in which counsel made their submissions, it is convenient first to consider the bills of lading claims. These are made by DBHH against Metinvest, to whom the bills were issued. As I have said, it is not in that dispute they were owners’ bills, that is to say they recorded or evidenced contracts under which DBHH, as owners of the “Bulk Chile”, undertook the carriers’ obligations. They named Metinvest as shippers of the cargo, and so evidence that Metinvest were the shippers: this was not disputed on the pleadings or at the trial. Accordingly, the bills of lading evidenced contracts of affreightment between DBHH as carriers and Metinvest (which I shall label the “bills of lading contracts”, notwithstanding the bills evidence rather than contain the contracts), and prima facie Metinvest were liable to pay freight to DBHH according to the terms of the bills of lading contracts: Scrutton on Charterparties (22nd Ed., 2011) art 185. That, as I say, is only a prima facie inference of the contractual position: as Hobhouse LJ emphasised in Cho Yang Shipping Co Ltd v Coral (UK) Ltd, [1997] 2 Lloyd’s Rep 641, it could have been displaced by evidence of a different contractual scheme, but there is no such evidence in this case. The fact that the bills of lading stated “freight prepaid” does not of itself show that Metinvest were not to be liable for freight which had not in fact been paid. As Hobhouse LJ said, loc cit at p.643, “Such words are not, in English law, words of contract … and their insertion in the bill of lading does not serve to negative a pre-existing, undischarged, contractual liability to pay freight”.

The bill of lading contracts provided that the freight payable by Metinvest was “payable as per [the voyage] charterparty”. This means that the terms of the voyage charterparty govern not only the amount of the freight payable by Metinvest but also the time of payment, the method of payment and who is to receive it: see India SS Co v Louis Dreyfus Sugar Ltd (The “Indian Reliance”), [1997] 1 Lloyd’s Rep 52. (The Gencon bills’ standard wording that incorporate the provisions of the voyage charterparty perhaps reinforce this, but add nothing.) The voyage charterparty did not expressly state to whom payment was to be made, but the implication is that it was to be made to Fayette as disponent owners. Accordingly Mr Happé submitted that the freight to be paid by Metinvest under the bill of lading contracts was to be paid to Fayette, and that DBHH were and are not entitled to require that it be paid to themselves.

A similar argument was considered in Tradigrain SA and ors v King Diamond Shipping SA (The “Spiros C”), [2000] 2 Lloyd’s Rep 319, a case in which owners claimed freight from shippers although the shippers had discharged their obligations to intermediate charterers in respect of freight payable under the sub-charter. Rix LJ agreed (at p.331) with the observation of Colman J at first instance that “… it has long been established that a shipowner can intercept to claim freight directly from the shipper at any time before it has been paid”. He referred to the decisions of Channel J in Wehrer v Dene SS Co., [1905] 2 KB 92 and of Greer J in Molthes Rederi Aktieselskabet v Ellermans Wilson Line Ltd, [1927] 1 KB 710. Of course, the contract recorded in the bill of lading could have provided that the owners had no right so to intervene and effect would have been given to such a provision, but Rix LJ said that the provision in the bill of lading contract that freight should be payable “as per charterparty” does not exclude the owners’ right to intercept freight. This is because, as stated in Chitty on Contract (30^th Ed, 2008) Vol 1 para 18-073, where a contract provides for payment to a third party, it is a matter of the construction of the contract whether the promisee can unilaterally (ie without the consent of the promisor) demand that payment should be made to himself”, and Rix LJ considered that “the typical case of the bill of lading in which freight is payable as per charterparty is probably such a contract”.

The right of the owners to intercept or to intervene so as to require payment to themselves is distinct from any right that they might have to a “lien” over freight. However, in The “Spiros C” the head charterparty was on the 1946 NYPE form and included clause 18, and Rix LJ observed (at loc cit p.332) that his analysis would be “entirely consistent with the regime under the time charter, under which the lien over sub-freight is, in the event of a default under the charter, to be subject to the shipowner’s claim”. As I understand the analysis of Rix LJ, the right of owners to intervene to have freight under their contract with shippers paid direct to themselves does not depend upon whether the charterers under the head charterparty have defaulted in paying hire or whether sums have “accrued due” (in the terms of clause 18 of the 1946 NYPE form) under the head charterparty. Unless the contractual arrangements expressly or impliedly so provide, payment to the charterers does not discharge the shippers’ liability for freight, and upon Rix LJ’s interpretation of the “typical case of the bill of lading in which freight is payable as per charterparty” the contractual arrangements cease so to provide once the owners have demanded of the shippers that payment be made to themselves (or not to the charterers).

Mr Happé submitted that Rix LJ’s analysis was by way of obiter dictum, that it is wrong and that I should not follow it, notwithstanding that Henry and Brooke LJ agreed with the judgment. I agree that Rix LJ’s observations were not part of the ratio of the case in that in The “Spiros C” the claim of the owners depended upon them showing both (i) that arrangements between the shippers and the charterers had not discharged the obligation to pay freight before they demanded payment to themselves, and (ii) that they could effectively intervene by demanding payment to themselves: and, since the shippers succeeded on the first point, the answer to the second question was of no consequence. But this does not much detract from the weight of the case as precedent: in Cross and Harris, Precedent in English Law (4^th Ed, 1991) at p.77, it is said of the position where litigation between A and B involves two points of law and a decision on either in favour of A obliges the court to give judgment for him: “If an appellate court decides one point in favour of A, and the other in favour of B, the decision on the second point is obiter if the ratio decidendi of a case must be a proposition of law upon which the order of the court is based. Yet it is difficult to believe that the decision would not have coercive effect so far as lower courts are concerned.” This properly states the authority of the judgments in The “Spiros C” over my decision, notwithstanding that Rix LJ stated (loc cit at para 58) that he preferred to rest his decision on the question about how the arrangements between the shippers and the charterers affected the owners’ rights. I recognise that the views of Rix LJ were questioned by Aikens et al, Bills of Lading (2006), who commented (at para 12.50) as follows: “It is … unclear from this decision whether on this analysis [the owners] can redirect payment of the freight at any stage or, if not, what event triggers such a right. The law on this point is unclear and it is respectfully submitted that the dictum needs to be treated with some caution”. But I do not think that it would be proper for me to depart from a precedent of this weight, even if I doubted it. In any case I would respectfully subscribe to the analysis of Rix LJ, of which Mr Happé made no specific criticism and which seems to me convincing.

However, Mr Happé also submitted that DBHH did not effectively intervene to demand payment of the freight to themselves and so did not prevent the payment by Metinvest to Fayette on 12 April 2011 from discharging their obligations to DBHH to pay freight. He did not dispute that, if DBHH did effectively demand payment to themselves before 12 April 2011, any payment to Fayette after the demand had been made cannot avail them: if they made payment after a demand, the payment would not, of course, be made in breach of the contractual arrangements with DBHH – Metinvest were entitled to pay Fayette what they wanted – but it did not discharge their obligations under the bills of lading contracts.

Mr Happé had two arguments. The first was that the First and Second Notices did not on their proper interpretation make such a demand under the bills of lading contracts. No particular form or wording is required for a demand or notice of intervention of this kind, provided the meaning is plain, but Mr Happé argued that both notices only made demand under clause 18 of the KLC charterparty and not under the bill of lading contracts. DBHH called the First Notice a “Notice of Lien” both in the heading and repeatedly in the body of the notice, including in the words introducing the first request and the second request. The heading of the Second Notice, which was sent after the vessel had started to load, indicates that DBHH’s purpose in sending it was to assert their lien over cargo, as well as over the freights and hires that were the subject of the First Notice.

I recognise the force of this argument. However, DBHH’s second request in the First Notice was that Metinvest arrange “payment of all such freight(s) and/or Hire(s) in [their] hands directly to [DBHH’s] account when due …”, and the expression “such freight(s) and/or hires(s)” refers to the first request in which they ask that Metinvest confirm the amount of “freight(s) and/or hire[s] due from you under any charters, bills of lading, or other contracts of carriage”. This covers freight payable under bills of lading contracts, and therefore on its face the second request is wide enough to cover freight falling due under any bill of lading contract made by Metinvest. DBHH (and CSAV) could not have any lien over freights under bills of lading contracts unless, perchance and improbably, charterers’ bills entitling Fayette to payment of freight had been issued, and to interpret the notices as directed only to rights of lien would, effectively, deprive of any effect the references in the First Notice to bills of lading.

This consideration seems to me a more powerful indication of the intended meaning of the First Notice (and of the repetition of the second request in the Second Notice) than DBHH’s description of it as a “Notice of Lien”. If a legal principle is needed to support this interpretation, I would invoke falsa demonstratio non nocet cum de corpore constat – the expression “Notice of Lien” being what Lord Hoffmann might call a misleading car number plate: see Synthon BV v Smithkline Beecham plc, [2005] UKHL 59 at para 37. This interpretation means that the description was incomplete, if not inaccurate, but it is not, in my judgment, significantly misleading. It is perhaps the less remarkable given that the typical purpose of owners intervening to require payment to themselves of bills of lading freight is to secure their position when the financial standing of intermediate charterers is uncertain. In The “Spiros C”, [1999] 2 Lloyd’s Rep 91, 96 Colman J drew an analogy between the two regimes (as Rix LJ observed at [2000] loc cit at para 52).

I add that, although it is couched in terms of a “request” that freight under the bills of lading contracts be made to DBHH, the First Notice makes clear that Metinvest could no longer discharge their obligations to pay bills of lading freights by paying Fayette: in commercial reality, it amounted to a demand for payment. In any case, if there be doubt about that, the Second Notice was expressed in terms of what DBHH “require[d]” and puts this beyond dispute.

Mr Happé’s second argument was that the First and Second Notices were not effective to “intervene” to require payment of freight to DBHH because DBHH could give notice only when money was overdue to them under their contractual arrangements for the carriage, and they have not showed, it was said, that by 1 February 2011 that there was overdue “at least US$742,975”, the amount mentioned in the First Notice. There is nothing in this point. First, an owner is not entitled to intervene to have freight paid to himself only if money is overdue to him in respect of the carriage. Of course, the right is usually exercised in these circumstances: in Federal Commerce and Navigation Inc v Molena Alpha Inc (The “Nanfri” etc), [1978] 1 Lloyd’s Rep 581, 591 Kerr J referred at first instance to clause 18 providing “additional remedies” in the event of default in the payment of hire, and at first instance in The “Spiros C” Colman J spoke of freight under a bill of lading contract being intercepted “if a disponent owner defaults under the head charter”. But I do not understand them to intend to define or restrict the circumstances in which owners can intervene. Colman J was seeking to draw the analogy with rights of lien that Rix LJ explained in the Court of Appeal: loc cit at para 52. There is no reason of principle that the right to intervene should be restricted as Mr Happé suggested.

In any case, when the First Notice was sent on 1 February 2011, money was overdue in respect of the hire from 18 January 2011 to 2 February 2011. I have rejected Mr. Happe’s submission that the invoice for this hire had not been delivered to KLC, but, even if it had not been, this would not affect the position: the hire would still have been overdue whether invoiced or not. I accept that the hire for the period from 2 February 2011, although falling due on 1 February 2011, was not overdue when the First Notice was sent, but that does not mean that the notice was in any way inaccurate. The First Notice stated (i) that KLC had failed to pay hire due and owing “In breach of charter”; and (ii) at least $742,875 was due and owing to Owners “at the date of this notice”. It did not state that KFC were in breach of charter in failing to pay at least $742,875. Moreover, even if it had implicitly asserted that KFC had failed in breach of contract to pay at least $742,875, I cannot accept that therefore the notice would be vitiated so as to be of no effect. Finally, even if First Notice were so vitiated, by 5 February 2011, when the Second Notice was delivered, the hire for both the period from 18 January 2011 and the hire for the period from 2 February 2011 were overdue and valid notice of intervention in respect of the bills of lading freight was given thereby.

I reject therefore the various arguments advanced on behalf of Metinvest in answer to the bills of lading claims, and I uphold them.

I come to the lien claims: CSAV make a lien claim against Fayette for hire payable by them under the trip charterparty and against Metinvest for freight payable by them under the voyage charterparty. (The KLC charterparty was made by DBHH as agent for CSAV, their undisclosed principal: as I see it, CSAV have intervened to assert their rights under the KLC charterparty and they, rather than DBHH, are the proper claimants to pursue these claims. However, there is no issue between the claimants and I did not hear submission about this.) In relation to these claims there are issues between the parties about (i) the proper meaning of clause 18 (“interpretation issues”); (ii) whether the notices given to Fayette and to Metinvest are sufficient to invoke rights under clause 18 (“notice issues”); (iii) whether a lien over “sub-freights” under clause 18 can effectively be invoke before they fall due; and (iv) whether any rights that CSAV have under clause 18 are defeated or curtailed by orders of the Seoul Court (“Korean proceedings issues”).

The main issue of interpretation is whether clause 18, properly interpreted, provides for a lien over sub-hire, or whether it applies only to freight, a question about which Lloyd J and Steyn J disagreed in Care Shipping Corp v Latin America Shipping Corp (The “Cebu”) (No 1), [1983] QB 1005 and Care Shipping Corp v Itex Itagrani Expert SA (The “Cebu”) (No 2), [1993] QB 1. In The “Cebu” (No 1) Lloyd J concluded that the reference in clause 18 to “sub-freights” is properly understood to cover sub-hire, that is to say, hire payable under a trip charterparty of the m/v “Cebu”, which was the last of a chain of four charterparties. He rejected an argument that a distinction should be drawn between sub-freight and sub-hire. He pointed out that, while freight “in the strict sense” refers to sums earned under a bill of lading contract or a voyage charterparty, usage going back to the nineteenth century included so-called “time freight” or freight under a time charterparty, referring in this context to the speech of Lord Blackburn in Inman SS Co Ltd v Bischoff, (1882) 7 App Cas 670, 678; and he observed a tendency in the twentieth century to assimilate the rules governing voyage charters and time charterers (notwithstanding the judgments in the Court of Appeal in The “Nanfri” etc, [1978] QB 927). Lloyd J declined to give clause 18 a construction that would mean that the owners’ security depended upon whether the sub-charter was a trip charterparty or a voyage charterparty: loc cit at p.1012F. Mr Bignall submitted that he was right to do so, observing that such a distinction would be particularly surprising in the context of a long-term charterparty such as the KLC charterparty where there was a real possibility of the vessel being sub-chartered for substantial periods either on time charterparties or on trip charterparties.

However, in The “Cebu” (No 2) (loc cit) Lloyd J’s view was rejected by Steyn J, whose judgment Mr Bignall analysed critically. He identified these six reasons given by Steyn J for not following Lloyd J’s decision.

I pay tribute to the care of Mr Bignall’s analysis and recognise that it has considerable force. In the absence of authority I should have given clause 18 the wider interpretation and concluded that the term “sub-freights” covers “sub-hire”. However, given that there are two conflicting decisions at first instance and the later fully considered the earlier decision, I must follow the later decision unless there are cogent and convincing reasons to do otherwise: see In re Lune Metal Products Ltd in Administration, [2006] EWCA 1720 (Civ) at para 9 and Ferrexpo AG v Gilson Investments Ltd and ors, [2012] EWHC 721 (Comm) at para 165. I do not consider the proper meaning of clause 18 to be so clear that I should reject the interpretation that Steyn J preferred: the criticisms of his reasoning are not so compelling as to justify that. I therefore conclude that the lien clause does not, on its proper interpretation, provide for a lien over the hire payable by Fayette under the trip charterparty.

There appeared at the start of the trial to be another issue about the meaning of “sub-freights” in clause 18: whether it includes sub-sub-freights (that is to say freight due under a sub-sub-charterparty, where, as here, there is a chain of at least three charterparties). However, in his oral submissions Mr Happé made it clear that Metinvest do not dispute that the term covers sub-sub-freights: Lloyd J so decided in The “Cebu” (No 1) case (loc cit at p.1013A) and Mr Happé’s concession was correctly made. I must therefore consider whether Metinvest have another answer to the lien claim against them.

Lloyd J explained that, since the lien under clause 18 operates where there is a single sub-charterparty by way of an equitable assignment of the right to freights payable under it, so too the law can and does give effect to the parties’ intention where there is more than one sub-charterparty by recognising “a chain of equitable assignments”, the assignee of the right to be paid sub-sub-freights assigning that assigned right up the chain. This analysis was not disputed before me. The parties in this case all accepted that a lien over sub-freights operates by way of an equitable assignment of the right to be paid them or, in the case of sub-sub-freights, a chain of assignments; and so the lien confers on the assignee a right against the person liable to pay the sub-freights (“the debtor”); and, even if this analysis had not been so accepted, the weight of first-instance authority in support of it would require me to adopt it. This view was most recently endorsed by Christopher Clarke J in Western Bulk Shipowning III A/S v Carbofer Maritime Trading ApS and ors, [2012] EWHC 1224 (Comm) at paras 32-52. He rejected the argument that the “lien” confers only a personal, contractual, non-possessory right of interception (see Dr Fidelis Oditah’s article, “The Juridical Nature of a Lien on Sub-Freight”, [1989] LMCLQ 191 and Agnew v CIR, [2001] 2 AC 710 per Lord Millett), and preferred the view that clause 18 takes effect as an assignment by way of charge, or at the least (for that was sufficient for the purposes of the application for the continuation of a freezing order that was before him) that this analysis was “well arguable”. Thus the position is rightly stated in Time Charters (6^th Ed, 2008) para 30.11: “The right of the owners under … the [NYPE] form to intercept sub-freights extends to sub-freights due to sub-charterers – and not therefore payable to the time charterers direct – if, under the terms of the sub-charter, the time charterers have similar rights of lien to those given to the owners under the head charter”. That condition is met here.

It was also argued that the lien claims should be rejected because the notices given by DBHH were defective. There is ample authority (referred to by Christopher Clarke J in the Western Bulk Shipowning case) that refers to the need for notice if the lien under clause 18 is to be invoked. For example, in The “Nanfri” etc, (cit sup at p. 591) Kerr J referred to the lien being exercised by “giving the appropriate notices”; and in the House of Lords Lord Russell of Killowen said (loc cit at p.784G) that the lien “operates as an equitable charge upon what is due from the shipper to the charterer, and in order to be effective requires an ability to intercept the sub-freight (by notice of claim) before it is paid by shipper to charterer”. Christopher Clarke J (loc cit at para 37) said that the assignment of the debt owed to the lienor means that “The debtor, once he has notice of the lien, may not make payment to his creditor if the obligation to the lienor is unpaid”.

Mr. Happé submitted that the First Notice did not give the notice required in order to exercise the lien, because it was defective or ineffective in that (i) it mis-stated the amount due to DBHH; (ii) it did not explain how the sum claimed is made up; and (iii) the First Notice wrongly claimed that KLC were in breach of the KLC charterparty in that they had failed to pay $742,875. These submissions are apparently based on the judgment of Scrutton LJ in Albemarle Supply Co Ltd v Hind & Co, [1928] 1 KB 307, a case in which garage owners claimed a lien over taxicabs in respect of repairs that they had done. He said, at p.318:

“A person claiming a lien must either claim it for a definite amount, or give the owner particulars from which he himself can calculate the amount covering the lien really existing. If he does not, unless excused, he has no answer to a claim of lien. He may be excused from tendering (1) if he has no knowledge or means of knowledge of the right amount; (2) if the person claiming the lien for a wrong cause or amount makes it clear that he will not release the goods unless his full claim is satisfied, and that claim is wrongful. The fact that the claim is made for more than the right amount does not matter unless the claimant gives no particulars from which the right amount can be calculated, or makes it clear that he insists on the full amount of the right claimed.”

I do not consider that this authority assists the defendants in this case. First, Scrutton LJ explained that the owners of goods subject to a lien are “excused” from tendering the amount required to free them from the lien if he did not do so because person claiming the lien had not told him the amount and he did not and could not know it: he said (at p.319) that the owners of the taxicabs could not defeat the lien by this argument because they “did not tender because they thought their agreement prevented the creation of a lien, not because they could not ascertain what repairs were done”.

In any case, Scrutton LJ was concerned with the position under a possessory lien. A lien over sub-freights is different in kind and Scrutton LJ’s reasoning has no application here. As Robert Goff J observed in Ellerman Lines Ltd v Lancaster Maritime Co Ltd and ors (The “Lancaster”), [1980] 2 Lloyd’s Rep 497, 501, clause 18 of the NYPE 1946 form provides for three liens (for owners’ liens over (i) all cargoes and (ii) sub-freights and for a charterers’ lien over the ship), and they are different in kind, only the owners’ lien over cargoes being a straightforward possessory lien (unless the charterparty is a demise charter so that the charterers have possession of the ship).

Nevertheless, Mr Happé’s submission requires me to consider the nature of the notice required to invoke the lien over sub-freights. In the case of statutory assignments under section 136 of the Law of Property Act, 1925, the debt or other chose in action is transferred only if notice in writing of the assignment has been given to the debtor or other obligee, and the notice is not effective if the notice mis-states the date of the assignment or, it seems, the amount of a debt transferred. These requirements must be strictly complied with because they directly concern the transfer of title: see W F Harrison & Co Ltd v Burke, [1956] 1 WLR 419, 421. However, I see no good reason to apply these strict rules (which have been criticised with some force: see R Munday, Notice of Legal Assignment, 131 NLJ 607) in this case. The rules in equity have never been so strict (see, for example, Whittingstall v King, (1882) 46 LT 520 and the note of Mr R E Megarry QC in 72 LQR 321). An equitable assignment transfers title without notice of it being given to the debtor, but payment to or settlement with the assignor before the debtor receives notice of the assignment discharges the debt, and for this reason an assignee might wish to give the debtor notice of it. (Notice to the debtor also means that he cannot set up against the assignee new and independent equities that arise between him and the assignor and gives that assignee priority over any subsequent assignees under the rule in Dearle v Hall). However, for notice of this kind no particular formality is required and “The language is immaterial if the meaning is plain”: see Lord Macnaughten in Wm Brandt’s Sons & Co v Dunlop Rubber Co, [1905] AC 454, 462 and Mackinnon LJ in James Talcott Ltd v John Lewis & Co Ltd, [1940] 3 All E R 592, 595D/E. This is well illustrated in a shipping context by Smith v Owners of SS “Zigurds”, [1934] AC 209. Where the assignment is by way of the crystallisation of a floating charge, the assignment is effective against the debtor not when the debtor receives only notice of the charge but also notice of the crystallising event and so notice of the assignment: Business Computers Ltd v Anglo-African Leasing Ltd, [1977] 1 WLR 578, 582A/B; Lightman & Moss, The Law of Administrators and Receivers of Companies (5^th Ed, 2011) para 22.061. But again no particular form of words is required so long as the meaning of the notice is clear.

But sub-charterers who owe sub-freight under a voyage charterparty can usually discharge the obligation by paying intermediate charterers rather than the owners even if they have (actual or constructive) knowledge that the head charterparty includes a clause such as clause 18 whereby the owners have a “lien” over sub-freights. For one thing, the lien under clause 18 is by way of security and is for an “amount due”, and the lien “can be exercised only in respect of hire already accrued due at the time the sub-freights are liened”: Time Charters (cit sup) para 30.38; see too Scrutton on Charterparties, cit sup, para 16.014. There is no reason that sub-charterers should be aware whether an amount is due under the head charterparty. As Kerr J said in The “Nanfri” etc (loc cit) at p.591, the operation of the lien must be limited by reference to normal shipping practice, and, until the lien is invoked, freight is normally paid to the intermediate charterers whether or not the sub-charterers have notice of a lien provision.

The lien is, as Christopher Clark J said, by way of a charge, and its operation can be seen to be in some ways analogous to that of a floating charge in that the shared assumption of the parties is that until the lien is invoked the parties will carry on business in the ordinary way. The analogy with the floating charge breaks down in that, as Lord Millett observed in Agnew v CIR, [2001] loc cit at para 41, clause 18 does not state a crystallising event and indeed Lord Millett said that it is incapable of “crystallisation”. What is required in order for the lien to be invoked is, as Lord Russell said, that the owners make a claim against the debtor, that is to say that they intervene or intercept the payment of the freight with a demand that it be paid to them under clause 18: hence the analogy with notices that owners can give shippers under bills of lading contracts, to which Rix LJ referred in The “Spiros C” (loc cit) at para 52.

Therefore, in my judgment effective notice to invoke the lien is given if the sub-charterers are informed (in one or more communications) (i) that the owners are assignees of debts owed (or to be owed: see para 61ffbelow) by the sub-charterers; (ii) what debts are so assigned; (iii) that an amount is due to the owners under the head charterparty; and (iv) that the owners require that the assigned debts be paid directly to them. No particular form of words is required for conveying the information. The First and Second Notices meet these requirements. The First Notice asserted that an amount was due to the Owners from KLC under the KLC charterparty and that they had a lien over “any balance of freight(s) … due under any charters ... relating to the voyage”. This could not reasonably be understood to refer only to money due at the time of the notice: see para 63. As I have said in the context of the bills of lading claims, I consider second “request” amounted to a demand for payment or a requirement that the sub-freights be paid to the Owners rather than intermediate charterers although it was couched in terms of a request, and in any case the Second Request put the position beyond doubt.

I do not accept that any of Mr Happé’s criticisms of the First and Second Notices means that they were ineffective either to give Metinvest notice of the assignments of the right to be paid the freights payable under the voyage charterparty or to demand their payment (when they fell due) to DBHH.

This leaves the question whether effective notice could not be given in respect of freights which were to fall due after the notice had been given. The question arises because freight under the voyage charterparty did not fall due until two banking days after the completion of loading and so after the First and Second Notices had been given. Mr Bignall did not contend that thereafter Metinvest were given any relevant notice before they paid Fayette on 12 April 2011. Three questions fall for consideration: (i) whether on the proper interpretation of clause 18 it was agreed that the Owners should have a lien over sub-freights that had not yet fallen due; (ii) whether the First Notice or Second Notice purported to cover sub-freights that had not fallen due; and (iii) whether the law allows assignees to give debtors effective notice of assignments before the assigned debt has fallen due.

Mr. Happé submitted, however, that, properly interpreted, clause 18 means that the right against Metinvest to be paid sub-freights under the voyage charterparty was assigned (by Fayette to KLC and then by KLC to CSAV) only when they are due for payment. I cannot accept that the parties intended clause 18 to be limited in this way. It is clear from the judgment of Lloyd J in The “Cebu” (No 1), loc cit at p.1016, (who cited the judgment of Mathew LJ in Hughes v Pump House Hotel Co Ltd, [1902] 190, 194-195) that this does not follow from the lien being by way of security. There would be no commercial justification for this interpretation of the clause, and the law recognises an assignment by way of charge over future debts: see Picarda, The Law relating to Receivers, Managers and Administrators (4^th Ed., 2006) p.106. Beale, Bridge, Gullifer and Lomnicka, The Law of Personal Property Security, (2^nd Ed, 2012) observe with regard to floating charges at para 6.79, “As a general rule, if the floating charge covers future assets, assets within the description of the charged future assets which accrue to the company after crystallization will fall within the crystallized charge”. The position is, to my mind, similar here: when the KLC charterparty and the trip charterparty were made, the sub-freights to which they referred were necessarily future assets, and the clause was intended to cover them. Mr. Happé observed that the lien over cargo conferred by clause 18 operates only when cargo is loaded, but that is because it takes effect as a possessory lien. This is not, to my mind, an indication of the parties’ evinced intention as to the sub-freights to which clause 18 was to refer.

As I interpret the First Notice, it is clear that it is directed to sub-freights that might fall due after its receipt and not only to any sub-freights that might be due when it was received by Metinvest. It asserted that the Owners had a lien over “any balance of freight(s) … due under any charters ... relating to the voyage”, but this could not, in my judgment, reasonably be understood to refer only to money due at the time of the notice because the second request called upon the recipient to make payment of “such freight(s) … when due”.

Mr Happé did not develop his argument that the law does not allow assignees to give debtors effective notice of assignments before the assigned debt has fallen due, and cited no authority in support of it. I reject it, although generally notice of assignment can be given only at the time of an assignment or afterwards: see Beale, Bridge, Gullifer and Lomnicka, The Law of Personal Property Security, loc cit, para 7.99. They observe that the position is less clear where, as here, there is an agreement to assign future debts, but refer to a dictum of Baggallay LJ in Roxburgh v Cox, (1881) 17 Ch D 520, 527 that suggests that in these circumstances too effective notice cannot be given before the assigned debt is due.

In Roxburgh v Cox an army officer had, in order to secure a loan, assigned commission that was to be paid to him when his retirement from the services was gazetted, but the commission was paid into his overdrawn bank account before the assignee gave notice to the bank. It was held that the notice was too late for the assignee to dispute the bank’s claim of set-off. Baggallay LJ said this (at p.527):

“It is admitted here that there was no notice whatever given to [the debtor] of the present claim of the [assignee] until the morning of the 19^th of December, and, in point of fact, any notice given by him before the money came into the possession of [the debtor] would have been ineffectual, as was decided in the case of Somerset v Cox …, which has been repeatedly recognised and followed. There was therefore no notice given by the [assignee] to [the debtor] before the morning of the 19^th which could have created a valid charge on the money in the hands of [the debtor] and this was after the right of set-off had arisen.”

Somerset v Cox (1865) 33 Beav 634 was another case in which an army officer charged the proceeds that might arise from sale of his commission. These and other army commission cases were explained by P O Lawrence J in Ipswich Permanent Money Club v Arthy, [1920] 2 Ch 257, 270, who pointed out that they are of “the class of cases dealing with assignments of future property, expectancies and possibilities”. The entitlement to freight, once the voyage charterparty had been concluded, is a present chose in action: see Colonial Bank v European Grain & Shipping Ltd (The “Dominique”), [1988] 1 Lloyd’s Rep 215, 221, in which Mustill LJ said when considering freight:

“All contractual rights are vested from the moment when the contract is made, even thought they may not presently be enforceable, either because the promisee must first perform his own part, or because some condition independent of the will of either party (such as the elapsing of time) has yet to be satisfied. Equally, all unperformed obligations to pay money are in one sense debitum in praesenti solvendum in futuro.”

(The decision of the Court of Appeal in this case was reversed in the House of Lords ([1989] AC 1056), but not on this point.)

The dictum of Baggallay LJ was directed to future debts, not existing choses, and it does not, to my mind, support the challenge to the First and Second Notices. There seems to me to be no reason in principle that notice given before a debt falls due should not be effective (if not for the purpose of determining priority between assignees and chargees or even, possibly, for determining questions of set-off, at least for the purpose of preventing the debt being discharged by payment to the party who agreed to assign it). Wood, English & International Law of Set-Off (1989) at para 16-119expressed the view (to which I would subscribe) that such a rule about future interests would be “arbitrary and out of accord with realities” with regard to set off, and that an assignee of present and future claims ought to be able to give advance notice to protect himself. The objections to such a rule with regard to whether assigned debts are discharged by payment to the assignor are all the more compelling, but in any case there is no such rule where an existing chose is assigned. As Mr Bignall observed, if the lien over sub-freights could be invoked only once they were due, this part of clause 18 would be emasculated: owners do not usually know when sub-freights fall due and are not realistically in a position to intervene before sub-charterers who pay their debts promptly make payment to the intermediate charterers. I conclude that the First and Second Notices were effective with regard to the sub-freights that fell due after the cargo was loaded.

I come to the Korean proceedings issues: Mr Happé submitted that “the purpose of the procedure put in place in Korea and given effect to by the Court Orders was to prevent alleged creditors, such as the owners, from gaining advantage at the expense of the generality of KLC’s creditors”, and that “The Court should be unwilling to permit such an advantage”. However, he accepts that the orders of the Seoul Court did not, as Mr Choi and Mr Kim agreed, have extra-territorial effect or purport to do so. In any case, the orders of the Seoul Court provide no answer to the lien claims (or to any of the claims in these proceedings).

Mr Happé’s argument is based upon an observation of Mr Kim that the Comprehensive Stay Order was designed to suspend creditors’ compulsory enforcement, which is defined in article 44 of the DRBA as meaning, among other things, “the compulsory auction sale proceedings for the execution of security interests”. Mr Kim said that, “Even though the Sub-hire Lien is characterised as a security interest, it is not clear to say that the notice sent out for execution of such a right can be covered by the compulsory auction sale proceedings for the execution of security interests and there appears no court precedent available in this respect”; but that in view of the purpose of the DRBA to prevent “any instance where the purpose of the rehabilitation proceedings may not be sufficiently achieved due to unsecured and secured creditors’ independent and separate enforcement of their rights … there is a basis to judge that the creditors’ enforcement action for executing security interest is generally prohibited, in addition to the simple auction sale proceedings”.

Mr Kim’s suggestion of such a purposive construction of the statute is advanced in tentative terms. Mr Choi firmly rejected it in a report in response dated 22 June 2012, and cited in support of his opinion the views of the Bankruptcy Division of the Seoul Court published by them in “Practice in Rehabilitation Cases”. His opinion is in line with a decision of the Seoul Court of 21 December 2011 in case no 2011 Hoehwak 382. I cannot accept that Mr Kim’s suggestion represents the present state of Korean law, and I conclude that the orders of the Seoul Court afford the defendants no answer to the lien claims. I uphold the lien claim against Metinvest.

The post-withdrawal claims are put in three ways:

By the email of 19 February 2011 CSAV offered that, if they withdrew the “Bulk Chile” from KCL, they would complete the voyage and discharge the cargo in consideration of Fayette complying with the First and Second Notices and confirming that they would pay hire from the date of withdrawal. The implication of the email is that the hire would be at the rate payable under the KLC charterparty: Mr Bignall so contended and Mr Happé did not dispute this. As I have said, Fayette did not accept that offer: in their reply on 23 February 2011 they disputed the validity of the First and Second Notices and did not agree to pay hire to CSAV (at the rate of $24,000 per day or at any rate). Nor can I accept that Fayette accepted the offer simply by accepting the vessel’s services: given that the cargo was on the vessel when it was withdrawn and in view of the express statement on 23 February 2011 that the validity of the notices of lien was in dispute, their conduct did not evince an intention to accept the offer (still less unequivocally do so).

The claimants’ pleaded case is that the contract for the continuing hire of the vessel at $24,000 per day was made in the communications between 18 and 23 February 2011 or in those communications together with Fayette’s “conduct in continuing to accept the Vessel’s services”; and for the reasons that I have explained I reject the pleaded case. Mr Bignall advanced other unpleaded contentions. (Mr Happé so observed in his written argument, but no application was made to amend.) I consider them no more convincing than the pleaded case.

Mr Bignall submitted that the email of 1 March 2011 contained or evidenced Fayette’s agreement to pay hire for the period after the vessel was withdrawn. I accept that in it Fayette presented themselves as charterers of the “Bulk Chile”: they so described themselves and they gave notice of redelivery of the vessel. However, I cannot accept that they thereby agreed to hire the vessel on the terms of the email of 19 February 2011 – they had, after all, expressly rejected those terms, including CSAV’s insistence that they comply with the notices of lien – and there is no suggestion that CSAV ever offered them the vessel on any other terms.

However, Mr Bignall had another argument, which was based on the email of 5 March 2011 to the master. He did not contend that the email itself contains an agreement by Fayette to hire the vessel or to accept any offer of CSAV, but he contended that I should infer from it, and in particular from the statement that the charterers (that is to say, as I understand it, Fayette) “confirmed to the owners that all hire due to the vessel under their [charterparty] could be transferred to the owners, DBHH”, that they had agreed with DBHH or CSAV to hire the vessel. This, he said, would explain why they presented themselves as charterers of the vessel in the email of 1 March 2011 and is consistent with the reference to “contractual obligations” in the messages to the master on 5 March 2011. I do not draw that inference. No communication in which Fayette confirmed their acceptance of an agreement of this kind is in evidence, and there is no sensible explanation for this if such confirmation were given. It is not clear to what Fayette were referring in their messages to the master, but, as I have said, most likely they were referring to the bills of lading contracts, or possibly they were alluding to their willingness (stated on 3 February 2011) to pay the hire under the trip charterparty to DBHH if KLC agreed to them doing so: after all, in the first email of 5 March 2011 refers to the charterers paying the hire under “their” charterparty, which I would understand to mean the trip charterparty. It suffices that I do not consider that there is a sufficient basis to infer that Fayette agreed to pay hire at the rate in the KLC charterparty.

I therefore reject the contractual post-withdrawal claim for hire of $24,000 per day. I come to the claim for payment on a reasonable remuneration on the basis that Fayette expressly or impliedly requested the vessel’s services. Mr Bignall relied upon the decision of Robert Goff J in Tropwood AG of Zug v Jade Enterprises Ltd (The “Tropwind”) (No 2), [1981] 1 Lloyd’s Rep 45. In that case owners had purported to give notice of withdrawal of a vessel but, after the charterers disputed its validity, the vessel loaded more cargo and proceeded to the delivery port for that cargo and discharged it there. Robert Goff J, having decided that the notice of withdrawal was valid and effective, determined that the charterers were liable to pay for use of the vessel after her withdrawal at the market rate. He said this (at p.53): "… the first question to be asked is whether the services were rendered at the request (express or implied) of the charterers, in which event the charterers will ordinarily be liable to pay a reasonable remuneration for the services rendered, a liability which can probably be categorized as contractual. If however there was no such request, then there can be no contractual liability on the charterers; and their liability (if any) to pay remuneration for the services so rendered can only derive from the principles of restitution". He held on the facts of that case that there had been an implicit request for services and therefore that the charterers were liable to pay "a reasonable remuneration, i.e. remuneration at the market rate prevailing at the time when, after [the date of withdrawal] the owners complied with the charterers' request …". In these circumstances, he did not need to "explore … the nature of the liability which might arise, in the absence of any request, under principles of the law of restitution".

Upon appeal from the decision of Robert Goff J, the Court of Appeal concluded that the vessel had not been withdrawn from service and so the question about remuneration for her services did not arise. However, Lord Denning MR expressed disagreement with Robert Goff J about remuneration after withdrawal (although the other members of the Court of Appeal, Dunn LJ and Fox LJ, expressed no view on this question). For reasons that I sought to explain in ENE Kos v Petroleo Basiliero SA (The “Kos”), [2009] EWHC 1843 (Comm) at paras 43 ff, I agree with the view expressed, despite the opinion of Lord Denning MR, by the editors of Time Charters (2008) 6^th Ed at paras 16.111-112 that owners are entitled to remuneration in these circumstances: "Where, after [a valid] withdrawal, the owners perform further services at the request of the charterers, they may become entitled to remuneration for those services under a new contract. Given the development of the law since The Tropwood (No 2), it is suggested that Robert Goff, J's view would now prevail if the matter came before the courts again". This view finds support in the judgment of Carruthers J in Mutual Export Corp and ors v Australian Express Ltd and ors (The “Lakatoi Express”), (1990) 19 NSWLR 285, 304.

I therefore consider that the contractual claim for reasonable remuneration for use of the vessel after she was withdrawn depends, therefore, upon whether Fayette expressly or impliedly requested these services. I have not found this an easy question, but I conclude that they did impliedly do so. After the withdrawal of the vessel, while CSAV had obligations under the bills of lading contracts, they were under no contractual or other obligation to Fayette to continue the voyage and to deliver the cargo, but Fayette would prima facie have been in breach of their obligations under the voyage charterparty if cargo was not delivered to Indonesia and Malaysia. However, Fayette served notices and gave instructions to the vessel (or purported to do so) by way of the notice of redelivery and on 5 March 2011. The implication is that they were calling upon the vessel to provide her services to complete the voyage.

Mr Happé submitted that Fayette’s communications should not be so interpreted. He pointed out that on 19 February 2011 CTM had called for Fayette’s “full co-operation” and on 3 March 2011 DBHH had asked for updated advice about the vessels “prospects”. He argued that Fayette’s communications are properly to be seen as them affording such co-operation as had been sought, rather than requesting services of the vessel. I cannot accept that submission: the communications with the master on 5 March 2011 were sent by way of objection to instructions given by the owners rather than in order to co-operate with them. I conclude that CSAV are entitled to be paid by Fayette reasonable hire or remuneration at the agreed rate of $23,000 per day for the period from 26 February 2011 to 10 March 2011.

CSAV have alternative claims against Fayette and Metinvest that they are entitled to be paid on a quantum meruit basis on the basis of unjust enrichment (or in restitution) for use of the vessel after she was withdrawn from KLC’s service in carrying the cargo to its destinations and delivering it there. They observe that otherwise the owners would have provided the vessel for the whole voyage and Fayette and Metinvest would benefit from that but not pay anything for much of the voyage (KLC having no claim for hire after the vessel was withdrawn from their service on 26 February 2011). If I am correct about the bills of lading claims and the contractual post-withdrawal claim for reasonable remuneration, these alternative claims do not arise. I shall consider them only briefly.

Initially Mr Bignall submitted that CSAV are so entitled because the defendants were unjustly enriched at their expense and that in these circumstances the defendants are liable unless they can rely upon a recognised defence. However, he rightly abandoned this argument: English law has rejected so general a rule, and a claim of this kind must be brought within a recognised category for which a remedy for unjust enrichment is available: Deutsche Morgan Grenfell Group plc v IRC, [2006] UKHL 49 at para 21 per Lord Hoffmann. More specifically, English law does not recognise a general right of recovery for benefits conferred on others or expenses incurred in conferring them: Petroleo Brasiliero SA v ENE Kos 1 Ltd (The “Kos”), [2012] UKSC 17 at para 19 per Lord Sumption. Accepting that this is the proper approach, Mr Bignall submitted that the claim is within a recognised category because:

Mr Bignall’s submission in support of the claim against Fayette is that, in the absence of a relevant contract or relationship of trust, if no liability in tort arises and subject to various recognised defences, a person is entitled to a quantum meruit by way of unjust enrichment when another chooses to accept his services, so long as he knew or as a reasonable man should have known that their provider expected to be paid for the services. He cited chapter 17 of Goff & Jones, The Law of Unjust Enrichment (2011, 8^th Ed) in support of his contention that the law provides relief on the basis of unjust enrichment in cases of “free acceptance”, an expression derived from the 1^st edition of Goff & Jones, The Law of Restitution (1966), p.30. A principle of this kind has had more academic than judicial recognition (and has been questioned academically: for example, by A Burrows in “Free Acceptance and the Law of Restitution”, (1988) 104 LQR 576), but it was, I think, acknowledged by Arden LJ in Benedetti v Sawiris, [2010] EWCA 1427 (Civ) at para 2 (although Etherton LJ, at para 143, considered that the basis upon which Mr Benedetti was entitled to quantum meruit relief for his services was immaterial): “A quantum meruit may be awarded where services have been rendered but there is no contract establishing the price to be paid for those services”.

For my part, I consider that English law probably does provide quantum meruit relief for “freely accepted” services, but I am not persuaded that Fayette would have been liable on this basis even if I had rejected the other claims. I agree with Mr Bignall that it was a benefit to Fayette that the cargo was carried to the destinations stipulated in the voyage charterparty: they thereby fulfilled their contractual obligations to Metinvest, and I cannot accept Mr Happé’s submission that, because under clause 9 of the Contract of Affreightment Fayette earned the freight on loading, it made no difference to them whether or not the contract in the voyage charterparty was carried out. However, a claim lies only where the services are “freely” accepted, where a defendant has not taken a reasonable opportunity open to him to reject the proffered services; and it does not lie when a defendant has had no option about whether to accept the benefit of them. In this case, CSAV were obliged under the bills of lading contracts to carry the cargo and deliver it to its destinations. Fayette (who had these obligations of CSAV well in mind, as is apparent from their communications of 23 February 2011 and, as I interpret them, those of 5 March 2011) were in no position to prevent CSAV from carrying out their obligations under the bills of lading contracts: it was not suggested that they should have sought to prevail upon Metinvest or other persons with interest in the delivery of the cargo to release CSAV from their obligations, and no evidence that, if they had sought to have CSAV released, they would have succeeded.

In support of the claim against Metinvest for remuneration on a quantum meruit basis, Mr Bignall made this submission: that, where goods are loaded on a vessel and the contractual arrangements for the bailment of the goods terminate while the goods are still on the vessel, the owner is under a duty as bailee to take reasonable care of the cargo and, as a correlative right, is entitled to remuneration for carrying out his duty from the bailor of the goods. He relied upon the decisions of the House of Lords in China Pacific SA v Food Corpn of India (The “Winson”), [1982] AC 939 and of the Supreme Court in The “Kos”, (cit sup). It seems to me that the principle established by those cases would apply in the present circumstances if the relationship between the bailors and the bailees were not governed by the bills of lading contracts. I accept that CSAV carried out their obligations to care for the cargo by carrying it to the destinations stipulated in the bills of lading contracts. Mr Happé did not submit that they could have met their obligations as bailees more economically by discharging the cargo at an interim port. In any case, it appears from the decision of the Privy Council in Gaudet v Brown (“Cargo ex Argos”), (1873) LR 5 PC 134 that the bailee is entitled to recover in respect of carriage of bailed cargo if that is “the best and cheapest way of making [it] available to the [bailor]” (at p.165 per Sir Montague Smith), and there is no suggestion that CSAV should have dealt with the cargo otherwise than as they did; and I would conclude that CSAV took the only course reasonably and practically open to them when they carried the cargo to Malaysia and Indonesia and delivered it there. Nor did Mr Happé suggest that there is any relevant distinction in this case between the remuneration that CSAV would have been entitled to recover and their expenses (which would include what Lord Sumption called in The “Kos” their “opportunity cost” of caring for the cargo, as well as out of pocket expenses: loc cit at para 29). But for my decisions on the bills of lading claims and the contractual post-withdrawal claim, I would have allowed the claim against Metinvest in unjust enrichment.

I therefore allow the bills of lading claims, the lien claim against Metinvest and the contractual post-withdrawal claim against Fayette for quantum meruit remuneration. I hope that the parties can agree upon the terms of relief to which the claimants are entitled but I shall, if necessary, hear further submissions about that.