[2020] EWHC 2030 (Comm)

High Court of England and Wales

Facts: Sea Master (shipowners) and Agribusiness (voyage charterers, shippers) entered into a a voyage charter on a Norgrain 89 form to carry maize and soybeans from Argentina to Morocco and Lebanon. Yousef Freiha was the consignee in the bills of lading incorporating the terms of the voyage charter. Arab Bank was also the holder of some bills of lading.

Under the terms of the charter, the charterer was obliged to pay demurrage for delays at the ports of loading and unloading. However, the voyage charterers went bankrupt, and the shipowners filed claims for demurrage against the bank and the consignee. They objected, pointing out that under the terms of the charter, only the insolvent charterers was responsible for payment of demurrage.

The shipowners insisted that in such a case there are implied terms in the charter that (i) the consignees will make all necessary efforts to unload and accept the cargo within a reasonable time and / or (ii) that the consignees will unload the cargo within a reasonable time. Since the consignees did not cooperate with the carrier during unloading and delivery, they breached these implied terms and must pay demurrage as damages. The arbitral tribunal dismissed the owners’ claim and he appealed under Art. 69 of the English Arbitration Act 1996.

High Court of England and Wales: owners’ appeal dismissed.

(i) Obligation of the consignee to ensure that the goods are discharged within a reasonable time

By default, in a contract of carriage, the obligation to unload the cargo lies with the carrier. Under English law, this obligation can be transferred to the consignee by the terms of the contract of carriage, but such a condition must be drafted clearly and unambiguously.

Under the terms of the charter, the consignees appointed and paid for the services of stevedores, and the discharge was to be carried out "free of cost to the ship." However, these conditions do not mean that the obligation to unload is transferred to the consignee. Only the costs of discharge are transferred to him. The obligation to discharge remained on the carrier (for example, the stevedores paid by the consignee were considered the owners’ employees under the terms of the charter). Therefore, there can be no question of an “implied” liability of the consignee.

(ii) The consignee’s implied duty to make every reasonable effort to ensure the discharge and delivery of the goods within a reasonable time

Since the duty to discharge under the terms of the charter initially rests with the carrier, it is meaningless to speak of the implied “obligation of the consignee to make every reasonable effort to ensure discharge and delivery”. This is an attempt to circumvent the clear terms of the charter by using an implied term.

Under English law, an term can be implied only if it is strictly necessary for the contract to function properly and if without it the contract loses its commercial effect. But a contract of carriage according to which the carrier undertakes to discharge the cargo without any assistance from the receiver is quite viable. Discharge does not require the participation of the consignee. The same applies to “delivery” of goods in the legal sense of the word - for delivery, the participation of the receiver is not required (for example, the carrier can leave the goods at the warehouse while waiting for the receiver to pick them up).

Finally, implied terms cannot contradict the express terms of the contract. Since the consignee was deliberately crossed out in the text of the clause dealing with payment of demurrage at the port of discharge, this means that the insolvent charterer was solely responsible for demurrage.

Comments: in Russian law, the carrier also has a default duty to discharge.⁸ At the same time, this obligation can be transferred to the consignee by the terms of the charter or the bill of lading (for example, using FIOS (free in / out stowed) terms, which usually mean that the freight rate includes only the cost of transportation, but not of loading/stowage/discharge - these operations are carried out by the shipper and the receiver).⁹ At the same time, if the charter does not contain a FIOS clause or a similar provision, but expressly states that the charterers are responsible for demurrage at the port of discharge, then the Russian court will most likely refuse to hold the consignee liable for such demurrage. The Russian MSC does not contain any mandatory rules imposing the duty to pay demurrage only on the charterers or only on the receivers/shippers. Accordingly, the parties are free to determine who will be responsible for demurrage and in what amounts. In this regard, shipowners should be especially careful when negotiating voyage charters in order to preserve their claims for demurrage against both the charterers and the consignees. Otherwise, the insolvency of one of them may leave the shipowner without any demurrage at all. ■

Notes