Alpha Marine Corp v Minmetals Logistics Zhejiang Co Ltd (MV Smart)

A shipowner’s right to collect freight under an owners’ bill of lading is not ordinarily restricted by an implied term in a time charterparty. The owner’s corresponding obligation to account to the charterer for any surplus over sums due under the charterparty provides a commercially coherent regime.

A term restricting intervention will be implied only if justified by business necessity or obviousness, and its content must be capable of clear expression. The availability of several materially different formulations is a strong indication that no term is necessary or obvious. The appeal was therefore allowed.

The Owners chartered the vessel MV Smart to the Charterers under an amended New York Produce Exchange form. After the vessel was lost, the Charterers claimed damages for freight which had not been paid by a sub-charterer. The arbitral tribunal held that the charterparty contained an implied obligation preventing the Owners from revoking the Charterers’ authority to collect bill of lading freight unless hire or another sum was due under the charterparty.

The Owners appealed under section 69 of the Arbitration Act 1996. The central question was whether that implied obligation existed and, if the award could not stand, what should happen to the Charterers’ alternative tortious claim.

1. Appeal allowed. The charterparty contained no implied obligation preventing the Owners from revoking the Charterers’ authority to collect freight under the Bills of Lading unless hire or another sum was due under the charterparty.
2. Under an owners’ bill of lading, the owner ordinarily has the right to demand the bill of lading freight. Where freight is payable as per a charterparty, the nominated recipient is ordinarily the owner’s agent and the owner may countermand that authority before payment. This right is not conditional on default by an intermediate charterer. The owner must generally account to the time charterer for any surplus over hire or other sums due under the charterparty.
3. The relevant restriction could arise only by implication. Applying the principles restated in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2016] AC 742, implication requires business necessity or obviousness. The term must also be clear and capable of clear expression.
4. The charterparty remained commercially and practically coherent without a restriction on intervention because of the owner’s obligation to account. Nor was it obvious that both parties would have given the same answer to the officious bystander. The Owners would probably have insisted on an unrestricted right to intervene where owners’ bills and carriage obligations were involved.
5. Each proposed formulation was defective. The All Freight and All Freight (Sum Identified) formulations created uncertainty about qualifying sums, timing and notice. The Dollar for Dollar formulation was difficult to reconcile with the established duty to account and raised further uncertainty about excess amounts, good faith and notice.
6. For completeness, if an All Freight Implied Term had existed, it would have been broken in any event because the Tribunal had found that a sum was due for bunkers as at 1 September 2013. The Award was set aside insofar as it awarded damages for breach of the implied term. The freight counterclaim was remitted to the Tribunal for consideration on its alternative Tortious Basis.

1. High Court (Commercial Court): permission to appeal under section 69 of the Arbitration Act 1996 was granted by Foxton J on 13 October 2020. The appeal was allowed. The relevant part of the arbitral award was set aside and the freight counterclaim was remitted to the Tribunal.