Dry Bulk Handy Holding Inc v Fayette International Holdings Ltd & Anor

Owners may intervene to require shippers to pay freight directly to them where the contractual arrangements do not exclude that right. The intervention need not depend on a prior default under the head charterparty and may concern freight that has not yet fallen due, provided the underlying contractual right already exists. A clause 18 lien in the 1946 NYPE form covers sub-freights, including sub-sub-freights, but does not cover sub-hire where the later first-instance authority on the point is followed. Effective notice must identify the assigned debts, state that an amount is due under the head charterparty, and require direct payment. After valid withdrawal, a charterer who requests or instructs further services may owe reasonable remuneration under a new contract.

The claimants were the owners and charterers of the Bulk Chile. The vessel was time-chartered to Korea Line Corporation, trip-chartered to Fayette, and voyage-chartered by Fayette to Metinvest. Korea Line failed to pay hire and the vessel was withdrawn from its service.

The claimants sought freight under owners’ bills of lading, enforcement of clause 18 liens over sub-freight and sub-hire, and remuneration for services provided after withdrawal. The central issues concerned the construction and effect of the lien clause, the sufficiency and timing of notices, the effect of Korean rehabilitation proceedings, and whether Fayette had requested the vessel’s post-withdrawal services.

1. Bills of lading claims allowed. The owners’ bills evidenced contracts under which Metinvest, as shipper, was prima facie liable for freight. The words “freight prepaid” did not discharge an unpaid contractual liability. Freight payable “as per charterparty” governed the amount, timing and method of payment, but did not exclude the owners’ right to intervene and require payment directly to themselves. The court followed the reasoning of Tradigrain SA v King Diamond Shipping SA (The “Spiros C”) [2000] 2 Lloyd’s Rep 319, while recognising that the relevant observations were technically obiter.
2. The First and Second Notices were effective demands. Their references to freight under bills of lading and their requirement that freight be paid directly to the owners made their commercial meaning clear. No particular form of words was required. The right to intervene was not confined to cases where hire was already overdue, and notice could validly concern an existing contractual right to freight payable in the future.
3. Lien claim against Metinvest allowed. Clause 18 operated by equitable assignment, or a chain of equitable assignments in relation to sub-sub-freights. The required notice had to state that the owners were assignees, identify the assigned debts, state that an amount was due under the head charterparty, and require direct payment. The notices satisfied those requirements.
4. Lien claim for sub-hire against Fayette dismissed. Following Care Shipping Corp v Itex Itagrani Expert SA (The “Cebu”) (No 2) [1993] QB 1, the court held that “sub-freights” in clause 18 did not include hire payable under a trip charterparty. The court was not persuaded that there were cogent reasons to reject the later first-instance decision.
5. The Korean rehabilitation orders afforded no answer. They had no extra-territorial effect, and the evidence did not establish that Korean law prohibited the lien claims.
6. Post-withdrawal claim against Fayette allowed in part. Fayette had not accepted the offer to continue the charter at $24,000 per day. However, its redelivery notice and instructions to the master impliedly requested completion of the voyage and discharge. Under the approach in Tropwood AG of Zug v Jade Enterprises Ltd (The “Tropwind”) (No 2) [1981] 1 Lloyd’s Rep 45, reasonable remuneration was therefore payable at the agreed rate of $23,000 per day from 26 February to 10 March 2011.
7. The alternative unjust-enrichment claims did not arise. The court nevertheless indicated that “freely accepted” services may support quantum meruit relief, and that a bailee who must care for cargo may in an appropriate case recover reasonable remuneration.