Tradigrain SA & Ors v King Diamond Marine Ltd "The Spiros C"

A shipowner who has authorised a time charterer to collect bill of lading freight cannot require payment again merely because the freight was paid by an agreed method differing from the charterparty’s original payment mechanics. The relevant question is whether, on construction of the bill of lading and the surrounding contractual arrangements, the payment was within the authority delegated to the time charterer.

A bill of lading incorporating a charterparty does not necessarily impose on the shipper an implied obligation to discharge the vessel within a reasonable time. The incorporation clause and the charterparty’s allocation of discharge responsibility must be considered. Where that regime places discharge responsibility on receivers or charterers, it negatives an implied term imposing that responsibility on the shipper.

The appeal arose from the Commercial Court decision of Mr Justice Colman concerning bills of lading issued for grain carried on the Spiros C. The owner claimed bill of lading freight from Tradigrain after Mercator, the time charterer, became insolvent. Part of the sub-charter freight had been satisfied by agreed deductions for disbursements and cash advanced to the master.

The owner also claimed discharge-port demurrage against the shippers. The Commercial Court held that the deductions were not payment of bill of lading freight and implied a term requiring the shippers to procure discharge within a reasonable time. The central issues were whether the deductions discharged freight, whether freight payable to a nominated third party could be claimed directly by the owner, and whether the bills imposed a discharge obligation on the shippers.

1. Freight paid by agreed deductions. The appeal succeeded on the freight issue. A bill of lading stating that freight was payable as per charterparty was construed in its commercial context. Until the owner intervened following the time charterer’s default, the manner of collecting freight was delegated to the time charterer. That authority could include payment by agreed set-off or advances to shipping agents or the master, even though the precise method was not stated in the sub-charter.
2. The agreed deductions therefore constituted payment pro tanto of the bill of lading freight before the owner’s intervention. The owner’s claim for $35,931.59 failed. The result avoided requiring the shipper to pay the same freight twice and was consistent with the commercial structure of the time charter, sub-charter and bills of lading.
3. Freight payable to a third party. The court clarified that a direct claim for bill of lading freight differs from enforcement of a lien over sub-freights. In the direct claim, the freight is the shipowner’s debt, but payment may be directed to a third party. Ordinarily, a bill of lading providing for freight payable as per charterparty may be construed as authorising payment to the nominated payee or as the owner directs. The court expressed that view but did not rest its decision on it because the deductions disposed of the freight claim.
4. Discharge obligation. The appeal also succeeded on the demurrage issue. Even assuming that a standard bill of lading may in some circumstances contain an implied term requiring discharge within a reasonable time, such a term must be reasonable and necessary and must be consistent with the incorporated contractual structure.
5. The sub-charter allocated discharge responsibility to receivers or charterers, not shippers. Its discharge regime therefore negatived an implication making the shippers responsible. The owner’s counterclaim for discharge-port demurrage failed.
6. Appeal allowed. The owner’s freight and demurrage counterclaims against the shippers failed. The claimants received their costs, summarily assessed at £32,000. Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Appeal from the Commercial Court decision of Mr Justice Colman. The Court of Appeal allowed the appeal and refused permission to appeal to the House of Lords.