Can You Recover The Costs Of Exercising A Lien?

Metall Market OOO v. Vitorio Shipping Company Limited (Lehmann Timber) [2013] EWCA Civ 650

On appeal from a Commercial Court decision, the Court of Appeal has overturned part of the first instance Judge's decision and held that a shipowner (hereinafter "owner") could recover the costs of storing cargo whilst exercising a lien for general average ("GA") security. However, it upheld the Judge's decision that the Owner's lien was not waived where an average guarantee was given, but no average bond provided.

The background facts

The Lehmann Timber did not have a happy start to life. In May 2008, on her maiden voyage from China to St Petersburg carrying a cargo of 1,089 steel coils, the vessel was captured by pirates and held until a substantial ransom was paid. After her release, the vessel sailed for Salalah, Oman. However, she suffered a main engine breakdown and had to be towed there. The Owner subsequently declared GA but, by the time the vessel arrived at St Petersburg on 20 September 2008, the steel market was in the process of collapsing and the cargo receivers, who were almost entirely uninsured, were neither willing nor able to secure the GA claim. The Owner was advised that, if he entered the port and tendered NOR, he would be forced to discharge and he would lose his lien. So, having only received a GA guarantee from the receivers' insurers in relation to 9% of the cargo, the vessel waited for five days off St Petersburg and then sailed to Hamina, Finland, where the cargo was discharged into a warehouse in October 2008. It remains there to this day and the storage charges exceed US$1 million.

The arbitration proceedings and the Commercial Court decision

The Owner commenced arbitration proceedings against the cargo receivers under the Congen bills of lading to recover GA and the costs of storing the cargo. The bills of lading incorporated the terms of a voyage charter, which provided for GA to be adjusted in London and in accordance with the York Antwerp Rules 1994. The cargo receivers denied liability and counterclaimed for the alleged conversion of the cargo. The Tribunal found in favour of the Owner.

On appeal to the Commercial Court, Mr Justice Popplewell agreed with the Tribunal that the Owner was entitled to refuse to discharge the 9% portion of the cargo having only received a guarantee and no bond, but he refused to allow the Owner to recover the storage costs of the cargo on the basis that he was obliged to apply the House...