Judgment of the 9th Commercial Court of Appeal of 23.09.2020, case № A24-2016/2020

(Sea Standard LLC v. Northeastern Steamship Company LLC)

Facts: On 3 November 2017, Northeastern (old owners) and Sea Standard (bareboat charterers) entered into a bareboat charter for The Zolotoy Most. The charter was for 6 months from the date of the contract, the rate of hire was 130,000 rubles per day. The charterer also paid a security deposit in the amount of 3.9 million rubles (equal to 30 days’ hire) into the owners’ account. The owners could unilaterally set the deposit off against the hire for the last 30 days of the charter, which preceded, among other things, the signing of the contract for the sale of the vessel.

The security deposit (3,9 million) and charter hire for the period from 7 to 30 November 2017 (3,12 million) were paid by the charterers (7,02 million). On 25 December 2017 - prior to the expiration of the charter - The Zolotoy Most ship was sold to Marine Standard-Bunker LLC (new owners). On the same day, the old owners, new owners and charterers entered into a novation agreement under which the new owners replaced the old ones as party to the charter. The parties also agreed that the old owners will set off the security deposit (3,9 million) against their claims against the charterers for unpaid hire from the commencement of the charter until the sale of the vessel (48 days).

However, for the 48 days of the charter, only 6,24 million of hire remained outstanding.

Due to the fact that the charterers have already paid not only the security deposit, but also part of the hire for November, an excess overpayment of 780,000 (i.e. 7,02 – 6,24) was formed. The old owners promised to return this amount to the charterers within ten days after the signing of the novation agreement, but never did so.

In January 2020, the charterers sent a pre-trial demand to the old owners to recover the overpayment. Meanwhile, it transpired that the old owners had been declared insolvent in October 2017 (i.e. even before the charter was entered into). The bankruptcy trustee recorded the charterers’ claims as “current payments” in the register and ranked them fifth. Believing that the overpaid part of the security deposit in the amount of 780 000 RUB qualifies as unjust enrichment, the charterers commenced proceedings against the insolvent old owners. The defendant argued that the claim should be treated as a claim arising out of a bareboat charter and the 1-year limitation period under Art. 409(2) MSC, rather than general 3-year period for unjust enrichment claims should apply.

Kamchatka Region Commercial Court: claim dismissed, since it arises out of a bareboat charter, and the 1-year limitation period applies. The claimant’s reliance on the rules on unjust enrichment is misplaced, since the defendant's obligation to return 780,000 rubles of overpayment follows expressly from the terms of the bareboat charter. Thus, the provisions of Art. 1103(3) of the Russian Civil on unjust enrichment are inapplicable.

5th Court of Appeal: the charterers’ argument that the provisions of the MSC, including those on special limitation periods, do not apply to their claim for the return of the overpayment is rejected. According to Art. 1103(3) of the Russian Civil Code, the rules on unjust enrichment apply to restitutionary claims (e.g. for total failure of consideration).

However, in this case, there is a contractual relationship between the parties, so the rules on unjust enrichment apply to only subsidiarily. The court of first instance correctly characterised the claim as arising from the bareboat charter, and therefore the special 1-year limitation period applied.

Comments: correct decision on the facts. The old owners’ duty to refund the overpayment to the charterers arose out of the novation agreement – in essence, a variation to the original bareboat charter Therefore, since the charterers’ overpayment claim is based on a variation to a bareboat charter, the special limitation period for bareboat charters applies, not the general one for unjust enrichment.

Probably, the claimant would have had more grounds to argue that the longer unjust enrichment limitation period applied if the parties had not made the old owners’ duty to return the overpayment an express term of the novation agreement. Then the charterers would have been able to claim that the unjust enrichment occurred at the moment when the old owners no longer held the title to the vessel and ceased to be a party to the charter. If so, the claim would arguably have arisen independently of the charter, and longer limitation period unjust enrichment claims would have applied. ■