Liens On Sub-Hire Under Standard Form NYPE 1946: Not Permitted

The New York Produce Exchange (NYPE) 1946 time charterparty form remains highly popular in bulk shipping. Following the High Court's decision in Dry Bulk Handy Holding Inc & another v Fayette International Holdings Ltd & another [2012] EWHC 2107 (Comm) ("BULK CHILE"), however, it is now clear that one of the key weapons in the owners' armoury when dealing with unpaid hire – namely the exercise of a lien on sub-hire – is unavailable on the standard wording of NYPE 1946.

Background

Clause 18 of the standard form NYPE 1946 stipulates that "the Owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this Charter". If the charterers' obligation to pay hire is as set out in clause 5 of the standard form, payment must be made by the charterers to the owners "semi-monthly in advance" – and if it is not so paid, the hire becomes an "amount due under this Charter", triggering the provisions of clause 18.

In those circumstances, the owners would be entitled to exercise a lien upon "all cargoes, and all sub-freights" for the hire due. This means that, rather than (or in addition to) persevering with their attempts to obtain hire from the charterers, the owners can insist that a voyage charterer that has contracted with the charterers must pay any freight owing under that voyage charter to the owners, rather than to the charterers.

The question that arises is this: what if the sub-charterers' contract with the charterers is a time charter, rather than a voyage charter? The amounts due under the sub-time charter will be sub-hire, not sub-freight, so can the lien over sub-freights permitted by clause 18 of NYPE 1946 be deemed to cover sub-hire?

This was one of the questions tackled by the High Court in "BULK CHILE".

Facts

The "BULK CHILE" was subject to a chain of three charters (between the owners (A) and charterers (B); the charterers (B) and sub-charterers (C); and the sub-charterers (C) and sub-sub-charterers (D)). The head charter (between A and B) was a time charter; the charter in the middle of the chain (between B and C) was a 'trip' time charter; and the charter at the end of the chain (between C and D) was a voyage charter. The two time charters in the chain were on the NYPE 1946 form.

A large amount of hire became outstanding under the head charter. Owners (A) invoked clause 18 and attempted to exercise a lien over sub-hire by sending a notice of lien to C. At the same time, A also attempted to exercise a lien...