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The Clipper Monarch (Castleton Commodities Shipping Co. Pte Ltd v. Silver Rock Investments, Inc. & Ors)

On 30th June 2015, the Commercial Court gave judgment in a claim for payment out of the proceeds of a judicial sale of cargo.

The claimant was the time charterer of a vessel, which it had in turn, as disponent owner, let out on voyage charter to carry a cargo of iron ore. In 2013, following various problems with non-payment, the claimant obtained an order from the Court under CPR Part 25.1(1)(c)(v) to sell the cargo. The terms of that order provided for the proceeds of sale to be held by the claimant’s solicitors to the further order of the Court and treated as subject to the same rights and interests as the cargo had been immediately prior to its sale.

After successfully selling the cargo, the claimant made an application for payment out of the proceeds on three grounds. First, that it could recover its expenses of sale as the producer of the fund. Secondly, that it had the benefit of a lien or similar right in respect of the cargo effectively securing the amounts of freight, deadfreight, demurrage and detention owed to it as disponent owner under the voyage charter. Thirdly, that it was a judgment creditor of the owner of the cargo in respect of the same amounts of freight etc. The judgments were obtained after the sale of the cargo. The claimant pursued arbitrations against its voyage charterer under the voyage charter and, as assignees of the head owners, against the shipper under the bill of lading under which the cargo had been carried. Final awards in its favour were converted into judgments of the Commercial Court under s.66 of the Arbitration Act 1996.

The Court held that the claimant was entitled to recover out of the proceeds on the first and third grounds. Although not necessary for the decision, since the amounts payable under the first and third grounds exceeded the available proceeds, the judge also concluded in his judgment that the claimant was entitled to succeed on its “lien” ground as well.

The claimant relied on two alternative “liens”. If, which was probably the position, the cargo was owned prior to sale by the shipper, the claimant relied on the voyage charter “lien” clause as incorporated into the bills of lading as a true possessory lien, the claimant having taken an assignment of the rights of the carrier. If, however, the cargo was owned by the voyage charterer, the claimant relied on the voyage charter “lien” clause as giving it a right with similar effect to a possessory lien, viz. a right to procure that the cargo be withheld from the voyage charterer by directing the employment of the vessel in its capacity as time charterer. The Court held that, on either scenario, the rights under the “lien” clause should be given effect as against the proceeds of sale by paying the claimant up to the value of the sums effectively secured by those rights.

Andrew Baker QC and Alex Carless appeared for the successful claimant.