Metall Market OOO v Vitorio Shipping Company Ltd & Anor

A shipowner exercising a general average lien may reasonably require an average bond from the consignee, supported by an insurer’s guarantee or cash deposit, before releasing the lien. An insurer’s guarantee for part of a uniform cargo does not necessarily waive the lien where the requested bond remains outstanding. The common-law rule in Somes is narrow and principally concerns an artificer’s lien. It does not prevent recovery of reasonable storage, care or detention expenses in a commercial carriage contract where the consignee’s failure to take delivery or discharge the lien causes the loss. Such expenses may be recoverable as contractual damages, demurrage, mitigation costs or expenses of bailment.

The appeal arose from arbitration concerning general average contributions following piracy and an engine breakdown. The shipowner retained the consignee’s steel cargo after the consignee supplied only an insurer’s guarantee for 98 coils and did not provide the requested bond or security for the remaining cargo. The arbitrators upheld the lien and awarded storage expenses. The Commercial Court, in [2012] EWHC 844 (Comm), upheld the lien but rejected the storage-expense claim.

The Court of Appeal considered whether the insurer’s guarantee discharged the lien pro tanto and whether the shipowner could recover expenses incurred after diverting and storing the cargo at Hamina.

Sir Bernard Rix gave the leading judgment. Lady Justice Arden and Lord Justice Patten agreed.

1. General average security and waiver. A shipowner’s lien for general average contribution arises when the general average sacrifice or expenditure occurs. The shipowner may reasonably stipulate for an average bond from the consignee, supported by an insurer’s guarantee or cash deposit, as the price of releasing the lien. The bond is a fresh contract with its own liability, limitation and procedural advantages. The authorities, including Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd (The Potoi Chau) [1984] 1 AC 226 (PC), did not establish that an insurer’s guarantee without a bond automatically discharges the lien.
2. The owner had clearly and reasonably maintained its demand for security covering the whole cargo. Acceptance and retention of the insurer’s guarantee for 98 coils was therefore not inconsistent with continuation of the lien. The coils could not realistically be treated separately from the uniform cargo. Question 1 was accordingly answered in favour of the owner. Even if retention had been unlawful, the consignee had failed to mitigate by providing the costless bond requested, so no damages were payable.
3. Storage and detention expenses. The principle in Somes v British Empire Shipping Co is narrow. It concerns the absence, in an uncontractual artificer’s lien, of an automatic right to recover the expenses of exercising that lien. It is not an overriding rule applicable to commercial carriage, contractual liens or general average liens.
4. In carriage by sea, a consignee’s obligation to take delivery includes doing what is reasonably necessary to facilitate the vessel’s arrival and discharge. Failure to discharge a reasonable lien may constitute breach or may make instructions for discharge invalid. The resulting delay may give rise to demurrage or damages for detention. There is no material distinction for this purpose between demurrage and damages for detention.
5. The diversion to Hamina and storage of the cargo were reasonable measures to preserve the lien, care for the cargo and mitigate detention losses. The expenses were recoverable on contractual and bailment bases. The benefits of preserving the cargo were not solely for the owner; the consignee also benefited from its continued care. The owner’s appeal on question 2 was allowed, the consignee’s appeal on question 1 was dismissed, and the arbitral award was upheld.

1. Court of Appeal (Civil Division): The consignee’s appeal on the lien issue was dismissed and the owner’s appeal on storage expenses was allowed. The arbitral award was upheld.
2. Commercial Court, Queen’s Bench Division: In [2012] EWHC 844 (Comm), the court upheld the lien but decided the storage-expense issue in favour of the consignee.
3. Arbitration: The arbitrators’ Second Final Declaratory Award dated 22 July 2011 upheld the lien and awarded the owner the Hamina storage expenses.