Daebo Shipping Company Ltd v The Ship Go Star

Case [2012] FCAFC 156

FEDERAL COURT OF AUSTRALIA

Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156

Citation: Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156
Appeal from: Daebo Shipping Co Ltd v The Ship Go Star [2011] FCA 1015
Parties: DAEBO SHIPPING CO LTD  v THE SHIP GO STAR
File number: WAD 373 of 2011
Judges: KEANE CJ, RARES & BESANKO JJ
Date of judgment: 7 November 2012
Catchwords:

ADMIRALTY – chain of time charterparties in 1981 Absatime NYPE form – claims in conversion and detinue in respect of ship’s bunkers when owners withdrew ship because head charterer failed to pay hire – question of which party had title to bunkers when owners withdrew the ship under head charter – when sub-charter provided for the sub-charterer to take over bunkers on delivery and pay for them, together with the first hire payment, within three banking days of the ship’s delivery – where delivery of ship occurs under NYPE form – whether title to the bunkers passed to the sub-charterer at the time of delivery – whether sub-charterer or its disponent owner had title to bunkers when ship withdrawn by owners under head charter.

ADMIRALTY – owners’ lien for sub-freights under cl 18 of  NYPE form charterparty – whether disponent owner’s right to receive payment for bunkers on delivery of ship to sub-charterer within owners’ lien over sub-freights under cl 18 – whether “subfreights” as used in cl 18 includes “hire”.

PRIVATE INTERNATIONAL LAW – choice of law – where oral and instantaneous written representations made by owners in Greece to representative of sub-charterer in Singapore about non-payment of hire by charterer and existence of owners’ lien over ‘sub-freights’ – where sub-charterer withholds payments due to its disponent owner under sub-charter caused by owners’ representations – law applicable to tort of interference in contractual relations between disponent owner and sub-charterer where ship located in Chinese territorial waters at times of representations and sub-charterer’s breaches of sub-charter – whether law of China or Singapore applicable as lex loci delicti.

TORT – unlawful interference in contractual relations – where owners urge sub-charterer not to make any payments to disponent owner under sub-charter because owners claim those moneys are “subfreights” within their lien under cl 18 of NYPE form over all moneys payable under sub-charters – where sub-charterer fails to pay disponent owner for hire and value of bunkers on delivery because of owners’ assertion of lien – whether owners’ reference to existence of lien under cl 18 of head charter interfered with contractual relations of disponent owner and their respective sub-charterers in chain of sub-charters.

Held:  Appeal allowed.  Ship was delivered to sub-charterer when placed at its disposal – sub-charterer then obliged to pay disponent owner hire in advance and value of bunkers on board within three banking days of delivery – owners urging of sub-charterer not to pay any money due under sub-charter, because they were considering exercising lien over sub-freight, occurred in Singapore and interfered…

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Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156
Case
[2012] FCAFC 156
Decision Date

CaseChat Overview and Summary

The case before the Court was an appeal against the decision of the Federal Court of Australia in Daebo Shipping Company Ltd v The Ship Go Star. The appeal involved complex issues relating to the ownership of bunkers on a vessel and the application of a lien over sub-freights. The primary dispute was whether the sub-charterer or the disponent owner had title to the bunkers when the owners withdrew the ship due to non-payment of hire by the head charterer. Additionally, the court had to decide on the applicable law for the tort of interference with contractual relations between the disponent owner and the sub-charterer, as well as the scope of the lien under the charterparty.

The legal issues at the heart of the case were whether the title to the bunkers passed to the sub-charterer at the time of delivery, and whether the disponent owner’s right to receive payment for the bunkers was subject to the owners’ lien over sub-freights. The court also needed to determine the applicable law for the tort of interference in contractual relations and whether the owners’ assertion of a lien interfered with the contractual relations of the disponent owner and their sub-charterers.

The Court concluded that the sub-charterer was obliged to pay the disponent owner for the hire and the value of the bunkers within three banking days of the delivery of the vessel. The Court held that the owners’ communication to the sub-charterer, urging them not to make any payments to the disponent owner, constituted an interference with the contractual relations in Singapore, leading to the disponent owner's loss of payments by the sub-charterer. The Court found that the owners’ assertion of a lien over the bunkers did interfere with the contractual relations of the disponent owner and their sub-charterer. The appeal was allowed on these grounds.

The final orders required the parties to confer and file short minutes of orders, including orders as to costs, reflecting the Court's reasons for judgment. If the parties could not agree, they were to file and serve their written submissions on the orders in dispute by a specified date. The orders were to be entered in accordance with Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The parties confer on or before 14 November 2012 and file short minutes of orders including orders as to costs to give effect to the Court’s reasons for judgment published today.

2. In the event that the parties are unable to agree any order pursuant to order 1, each party file and serve its written submissions as to the order or orders in dispute on or before 14 November 2012.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Before we discuss the arguments agitated by the parties on the appeal to this Court, we will summarise the facts in greater detail. The primary facts as found by the primary judge are not in dispute; but there is a dispute as to whether the primary judge erred in regarding the owners’ communications with Nanyuan as having their effect on Nanyuan in China rather than in Singapore. After setting out the primary facts we will summarise the reasons of the primary judge before turning to consider the arguments of the parties.THE FACTS The following diagrammatic representation of the chain of charter parties may assist an understanding of the issues addressed by the primary judge: Each of these time charters was in the 1981 NYPE form with substantially similar back to back rider clauses but with differing charter rates and charter periods. The relevant portions of the clean recap read as follows:-Delivery : dlosp CJK , ATDNSHINC-Laycan: 2/6 JAN , 2009 LT…-HIRE PAYABLE EVERY 15 DAYS IN ADVANCE. SUBSEQUENT HIRES ALSO IN ADVANCE EVERY 15 DAYS. FIRST HIRE + BOD value to be PAID TO OWNERS nomi bank W/IN 3 BANKING DAYS OF VESSELS DELIVER TO CHRTS…-BUNKER CL: BUNKERS ON DELIVERY ABT 600-850 MTS IFO AND ABOUT _60-85 MTS MGO-BUNKERS ON REDEL TO BE APPROX SAME QTY AS ON DELIVERY. PRICES BOTH ENDS USE _203__/MTFOR IFO AND USD _450 __MT FOR MGO- BOR to be abt the same quantities as on delivery. chrts have the right to deduct value of BOR from last sufficient charter hire…- ARBITRATION IN LONDON/ENGLISH LAW TO APPLY- OTHERWISE AS PER ows’ btb CP WITH LOGICAL/MINOR ALTS AS PER MTF The Daebo sub-charter with Nanyuan contained the following clauses in the NYPE form:Duration: The Owners agree to let and the Charterers agree to hire the vessel from the time of delivery for … (lines 27-28)Delivery: Vessel shall by placed at the disposal of the Charterers on dropping last outward sea pilot, one safe port, world wide, any time day or night, Sundays and Holidays included. (Owners will revert with exact ranges 30 days before delivery.) (Emphasis in original) (lines 34-37)…2. The Charterers, while the vessel is on-hire, shall provide and pay for all the fuel except as otherwise agreed……31. Charterers to take over and pay together with first hire payment bunkers upon vessel’s delivery. Reverting with quantities/prices. On redelivery bunkers same quantities and same price both end. Clause 18 of the 1981 NYPE forms in each charter is in the following terms:The Owners shall have a lien upon all cargoes and all sub-freight for any amounts due under this Charter, including general average contributions, and the Charterers shall have a lien on the ship for all monies paid in advance and not earned, and any overpaid hire or excess deposit to be returned at once. Charterers will not suffer, nor permit to be continued, any lien or encumbrance incurred by them or their agents, which might have priority over the title and interest of the Owners in the vessel. Some of the terms of the sub-charter between Daebo and Nanyuan in addition to those contained in the 1981 NYPE form contained in a clean recap set out at [16] were summarised by the primary judge as follows:The terms of the Nanyuan sub-charterparty are set out in a clean recap by email from Nanyuan’s agent, Ara Shipping Co Ltd. The cargo under the Nanyuan sub‑charterparty was to be carried from Fangcheng in China to Angola, with re-delivery in Angola. The clean recap email provided for the following relevant terms:(a)Delivery: “dlosp CJK, ATDNSHINC” (delivery: [dropping] last outward sea pilot Chang Jiang Kou [a port near Shanghai] any time day or night Sundays and holidays included).(b)Hire payable every 15 days in advance. Subsequent hires also in advance every 15 days. First hire [+] bunkers on delivery value to be paid to [Daebo’s] nominated bank within 3 banking days of the vessel’s delivery to Nanyuan.(c)Bunkers on delivery were about 600-850 metric tonnes IFO and about 60-85 metric tonnes MDO.(d)Bunkers on redelivery to be approximately the same quantity [as] on delivery. Prices used on both ends USD 230/MT for IFO and USD 450/MT for MDO.(e)Bunkers on redelivery to be about the same quantities as on delivery. Charterers have the right to deduct value of Bunkers on redelivery from last sufficient charter hire.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The parties agreed that it would be appropriate for the Court to make orders that Daebo International be substituted as plaintiff below and as appellant in place of Daebo and that Daebo International pay the costs of the interlocutory application for its substitution.Conclusion We will direct the parties to confer and file short minutes of orders (including orders as to costs) and in the event of disagreement, file and serve written submissions as to the contentions of the parties.

Ratio Decidendi

Legal Principle Established

Subsequently, in Care Shipping Corp v Itex Itagrani Export SA, “The Cebu” (No 2) [1993] QB 1 (“Cebu (No 2)”), Steyn J held , because of a change in modern usage, that “sub-freights” did not extend to hire charges payable under a time charter party. The owners submit that the approach of Lloyd J in The Cebu (No 1) is to be preferred. CONSIDERATIONDaebo’s claim to the bunkers Under a time charter in the NYPE and similar forms, ordinarily, property in the bunkers on board at the time of delivery of the vessel will pass, at that time, to the charterer: The Span Terza (No 2) [1984] 1 WLR 27 at 31G-32A; [1984] 1 Lloyd’s Rep 119 at 122 per Lord Diplock with whom the rest of the House of Lords agreed; The Saetta [1993] 2 Lloyd’s Rep 268 at 273 per Clarke J. Here, the terms of the Daebo sub-charter were expressly adopted in the clean recap, with logical and minor alterations to give effect to specific provisions in that recap. Thus, delivery of Go Star to Nanyuan was to occur at Chang Jaing Kou on dropping the last outward sea pilot (cl (a) of his Honour’s summary of the clean recap’s terms: see [18] above); lines 34-37 of the 1981 NYPE form. Delivery under a time charter occurs when the owner (or disponent owner) places the ship at the charterer’s disposal, as Roskill J explained in The Madeleine [1967] 2 Lloyd’s Rep 224 at 238, when he said: It is, of course, axiomatic that in a time charter of this description delivery does not import any transfer of possession. An owner delivers a ship to a time charterer under this form of charter-party by placing her at the charterers’ disposal and by placing the services of her master, offices and crew at the charterers’ disposal, so that the charterers may thenceforth give orders (within the terms of the charter-party) as to the employment of the vessel to the master, officers and crew, which orders the owners contract that their servants shall obey. Delivery in this sense, under the time charter, not only places the vessel at the disposal of the charterer, but it also marks the time of commencement of the charterer’s obligation to pay hire: The Niizuru [1996] 2 Lloyd’s Rep 66 at 68 per Mance J; Terence Coghlin, Andrew W Baker, Julian Kenny, John D Kimball: Time Charters (6th ed) (Informa; London 2008) at [7.29], [7.33]: see cl 4 (lines 96-101) of the 1981 NYPE form. Here, the clean recap provided that “FIRST HIRE + BOD [Bunkers on delivery] value to be PAID” to the owners (i.e. Daebo’s) nominated bank within three banking days of the vessel’s delivery to Nanyuan. This qualified cl 31 of the 1981 NYPE form, that provided “Charterers to take over and pay together with first hire payment bunkers on vessel’s delivery”. And, as is usual in time charters, cl 2 of the 1981 NYPE form required the charterer to provide and pay for all the fuel. The recap had the effect of allowing Nanyuan, as charterer, three banking days after delivery of the vessel, before it had to pay both the first 15 days hire in advance and the value of the bunkers at the time of delivery.