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Entitlement to Payment for Hire and Bunkers Following Termination of Charter

SSM Roundel

Steamship Mutual

Published: March 01, 2012

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In London Arbitration 12/11 (Lloyd's Maritime Law Newsletter of 23 December 2011, Issue 837) the vessel was charted on an amended Baltime 1939 form and delivered to charterers on 13 July.  Charterers failed to pay hire on delivery or the subsequent payment due on 28 July.  The vessel was laden with bagged cement bound for Matadi when, on 3 August, charterers told owners they were “obliged to stop any activities” and went on to expressly ask owners to “at least discharge the goods.”

By 14 August, three instalments of hire remained unpaid and owners gave charterers 72 hours’ notice to pay hire due or the vessel would be withdrawn and simultaneously gave a notice suspending performance immediately. Upon expiry of the 72 hours, owners notified charterers that they were treating the failure to pay hire as repudiatory conduct which was duly accepted, thus bringing charter to the end and, further, withdrew the vessel from charterers’ service as per the anti-technicality notice given. 

Owners claimed US$207, 948.06 for unpaid hire, bunkers and other sums due upon termination of the charter and additionally the sum of US$35, 890.07 as quantum meruit for hire and bunkers consumed for carrying and discharging cargo after termination of the charter.  

The tribunal found that the first claim clearly succeeded.  As regards the second, quantum meruit claim, relying on ratio of Goff J at first instance in “The Tropwind (No2)” [1981] 1 Lloyds’ Rep. 45:

                “The first question to be asked is whether the services so rendered by the shipowners 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 categorised as contractual.”

Owners had argued that if they provided services at charterers’ request, charterers should be liable to pay remuneration for those services.  This had been subsequently doubted by Denning LJ in the Court of Appeal but the point was obiter as the withdrawal was held to have been invalid.

In LMLN 937, charterers had expressly asked owners to “at least” carry the cargo to the port of discharge and this request was made at a time when charterers were already in breach of charter although prior to termination. As such, charterers must have been aware of the risk of the charter coming to an end before the discharge port was reached and therefore the request was held to be an ongoing one.

The tribunal considered The “KOS” [2010] 2 Lloyds’ Rep. 409 (see earlier website article Withdrawal - Remuneration for Continuing Service - owners had withdrawn the vessel half way through loading and discharged the cargo back ashore at the loadport) in which the Court of Appeal denied owners’ claim for remuneration after withdrawal as they were held to be doing no more than required of a gratuitous bailee. 

The Tribunal in LMLN 837 did not find anything in The “KOS”  Court of Appeal decision that  prevented them from finding for owners  in accordance with the dicta of Goff J in the  “The Tropwind (No2)”  and were satisfied the requirements set out in that case had been met such that owners were entitled to the quantum meruit claimed. On the 2nd May, 2012,  the Supreme Court allowed an appeal against the decision of the Court of Appeal. This article will be updated and an article discussing the decision will be published shortly on the Steamship Mutual website.

It must be remembered that the exercise of a right of withdrawal at a time when there is cargo on board the vessel does not release an owner from any pre-existing obligations to cargo interests under bills of lading or otherwise. The owner would ordinarily be obliged to complete the voyage and discharge the cargo at his own expense. Recovery from the charterer of compensation for the time and expense involved is not to be assumed.

Article by Anna Yudaeva

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