Lord Marine Co. S.A., v Vimeksim SRB D.O.O., (The Lord Hassan) [2024] EWHC 3305 (Comm) involved a dispute over unpaid freight, and the exercise of a contractual lien on cargo in Turkey with a request to the High Court for an order that the cargo, which was deteriorating, be sold. In April 2024 a voyage charter party was concluded under the Synacomex 200 standard terms for a voyage carrying grain from Ukraine to Turkey. Clause 21 granted the owners a lien on the cargo for freight, demurrage, deadfreight, and general average contributions. A bill of lading was issued on Congenbill 1994 form, which incorporated the terms of the charterparty. Freight was marked as “prepaid” but was never actually paid and the bill of lading was retained by the owners who exercised their contractual lien on the cargo before discharge in Turkey. The lien was upheld by a Turkish court, and the cargo was moved to a warehouse in Iskenderun owned by the receivers while storage costs were borne by the owners. The owners commenced arbitration against the charterers for the outstanding freight and sought judicial permission to sell the deteriorating cargo to preserve its value and satisfy the outstanding freight.
Bryan J held that ordered a sale of the cargo, pursuant to s. 44 of the Arbitration Act 1996 which gives the Court powers exercisable in support for arbitral proceedings, in relation to, inter alia, the sale of any goods the subject of the proceedings. Sub-section 3 provides “If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.” The court has under section 44(1), the same power “as it has for the purposes of and in relation to legal proceedings.” The relevant power in relation to legal proceedings is contained in CPR 25.1; namely the power to make an order for “the sale of relevant property which is of a perishable nature or which for any other good reason it is desirable to sell quickly.”
A similar request had been granted previously in The Moscow Stars [2017] EWHC 2150 (Com) Males J ordered the sale of a liened cargo of oil that was not perishable but the cargo had remained on board for over nine months and in the absence of an order would remain there for many months to come. The present case was similar but there was evidence showing that the cargo was by its very nature perishable and was deteriorating rapidly. In the present case, the liened cargo remained in owners’ possession and was stored with a storage man or agent appointed by owners. Although the warehouse belonged to the receivers, owners retained a right of possession and for this purpose receivers were owners’ agents. Owners could not be said to have lost the lien by reason of parting with possession.
A factor distinguishing this case from The Moscow Stars was that here it appeared that the cargo had been sold to a third party, but this did not give rise to any defence to owners’ claim against charterers or their right to assert the lien. The receivers, the cargo owners, had no contractual right against the owners, as the bill of lading remained with the owners and had not come into the possession of any third party able to sue as a ‘lawful holder’ under s2.1 of COGSA 1992.
Even if the receivers had been a ‘lawful holder’ the terms of the bill of lading which incorporated the charterparty would have meant that the lien was lawful as against the receivers. Bryan J pointed to a precedent for ordering the sale of cargo owned by a third party in the decision of the Singapore High Court in Five Ocean Corporation v Cingler Ship PTE Ltd (PT Commodities and Energy Resources, intervenor) [2015] SGHC 311 (“The Corinna”). The marking of the bill of lading as “freight prepaid” could potentially give rise to an estoppel in relation to the consignee or endorsee who had relied upon the fact that the bill of lading was marked as freight having been prepaid. The effect of the term is by way of an estoppel and not as a matter of contract. It did not estop the shipowner from asserting a right to unpaid freight under such a bill of lading against a party who had not relied on the representation about the payment of freight or who knows the truth.
Bryan J recognised the potential risk of wrongful exercise of the lien, and required the owners to provide a $75,000 undertaking as security for any losses that might arise from the sale. This could take the form of a letter of undertaking from the owners’ P&I Club or a payment held by their solicitors.
Source: https://iistl.blog/2025/01/10/liens-and-sale-of-cargo/