Delay in Releasing Bills of Lading

March 1997

In London arbitration 25/95 (LMLN 421), the vessel was voyage chartered on an amended Synacomex form for the carriage of wheat in bulk. Clause 23 of the charterparty provided, inter alia, that freight was payable:

".... 95% less commission, brokerage, estimated dispatch in loading, if any, and Owners' contributions towards extra insurance, if any, payable within 3 banking days after signing last clean on board bill of lading .... owners to immediately instruct loading port agents to release bills of lading on receipt in Owners' office of a telex from Charterers' bank that the freight as agreed above has been paid. balance less dispatch or plus demurrage .... payable within 30 days after receipt of Owners' final freight account ...."

The vessel completed loading at 1945 hours on 16 February. The master initially refused to sign the bills of lading because there was a dispute with the shippers as to the quantity of cargo loaded. The owners wished to carry out a draft survey to determine the quantity of cargo loaded, but eventually agreed to put the shippers' figures on the bills of lading on a "without prejudice" basis. A telex from the charterers' bank was then received by the owners on 20 February stating that the freight had been paid. However, the owners refused to release the bills of lading in accordance with clause 23 on the grounds that they were owed substantial sums in respect of damages for deviation and detention. The bills of lading were eventually released late on 9 March and were negotiated by the charterers on 17 March.

The charterers alleged the owners had failed to issue and release the bills of lading in accordance with the charterparty and claimed damages by way of interest on the value of the cargo from 17 February until 10 March. The tribunal held that the owners had not acted in breach of charter in delaying the issuance of the bills of lading until the dispute as to the quantity of cargo to be entered on the face of the bills of lading had been resolved. The charterers were not, therefore, entitled to any damages in respect of this period.

However, the tribunal held that the owners had not been entitled to refuse to release the bills of lading after receiving the charterers' bank's telex confirming payment of freight on 20 February. The owners' attempt to force the charterers to pay damages for detention and deviation was a clear breach of clause 23 and the charterers were entitled to damages for the period from 20 February until 10 March. The tribunal accepted that the proper measure of damages was interest on the value of the cargo for the period in question.

This case illustrates that owners must ensure that they do not place themselves in breach of charter when trying to force recalcitrant charterers to pay sums due to them. In the present arbitration the owners' liability in damages was limited to U.S.$18,203.23, but the potential exposure in relation to high value or time sensitive cargoes could be significant. In case of any doubt, Members are urged to contact the Club for advice at the earliest possible moment.