Could Owners Be Liable For Conversion By Retaining Bunkers On Board The Vessel After Withdrawal?

Daebo Shipping Co Ltd v. The Ship GO STAR [2012] FCAFC 156

The Federal Court of Australia recently considered whether, as a matter of English law, Head Owners could be liable to Disponent Owners for conversion or detinue as a result of retaining bunkers on board the vessel after lawful withdrawal from the head charter. The Court also dealt with a claim for interference with Disponent Owners' contractual relations, arising from various notices sent by Head Owners to the Charterers at the end of the chain.

The background facts

The vessel was chartered under a string of time charters on the 1981 NYPE form in the following charterparty chain: SA - BMS - Bluefield - Daebo - Nanyuan.

All charters were on substantially back-to-back terms, with English law to apply and Clause 31 reading:

"31. Charterers to take over and pay together with first hire payment bunkers upon vessel's delivery. ... On redelivery bunkers same quantities and same price both end."

Daebo chartered the vessel to Nanyuan in December 2008, with delivery on 3 January 2009. The vessel sailed to the loading port between 3 - 8 January 2009. By that time, BMS had defaulted in hire payment under the head charter. Given this, SA informed Nanyuan of their intention to withdraw the vessel and advised Nanyuan "not to pay any sum as [they] may be called upon to pay twice over such sum".

Nanyuan accordingly withheld payment of the first hire sum and the value of bunkers on board, which had become due under the sub-charter. They also purported to cancel or withdraw from the sub-charter, arguing that SA's threat to exercise a lien on sub-hire meant the vessel was not lawfully ready in all respects at the time of delivery and, therefore, was never lawfully delivered.

Shortly thereafter, SA withdrew the vessel under the head charter. Daebo demanded redelivery of the bunkers on board the vessel (for which they had not been paid by Nanyuan), but SA refused.

Daebo commenced proceedings against SA for:

Damages in conversion and detinue in respect of the vessel's bunkers; and Damages in respect of the payments withheld by Nanyuan, on the basis that SA had unlawfully interfered with the performance of the sub-charter. At first instance, the primary Judge dismissed Daebo's action on both counts. Daebo appealed.

The Federal Court of Australia decision

(1) Claim for conversion and detinue

The Judges on appeal upheld the primary Judge's decision that Daebo had no claim for conversion or detinue since...