Lord Marine Co SA v Vimeksim Srb DOO (The “Lord Hassan”) [2024] EWHC 3305 (Comm) – King’s Bench Division, Commercial Court (Bryan J) – 14 October 2024

Lord Marine (the Owners) and their vessel, Lord Hassan, entered into a voyage charterparty with Vimeksim (the Charterers) on or before April 12, 2024. By May 18, 11,000 mt of cargo had been loaded at Chornomorsk. Lord Marine issued the bill of lading on a standard Congenform 1994 form, which went on to name AAK, the consignee, as the “Receivers”, despite neither them, nor the Charterers ever receiving it. In error, the freight was categorized as “Prepaid”, despite not being paid at that time, or at all.

Voyage Details 

On April 12, 2024 Lord Marine (the Owners) and Vimeksim (the Charterers) entered into a voyage charterparty. By May 18, 2024, 11,000 mt of Ukrainian corn was loaded on Lord Marine’s vessel, the Lord Hassan, at Chornomorsk. Because the freight was not paid, the Owners retained the bill of lading, meaning neither the Charterers, nor the Receivers, were ever sent it. After loading, the vessel continued to Iskenderun, Turkey, and exercised their contractual lien over the cargo prior to discharge.

The Owners’ commenced arbitration to recover unpaid freight. The Charterers neglected to appoint counsel; therefore, the Owners’ LMAA arbitrator was nominated and confirmed as the sole arbitrator, with his consent, on Oct. 4, 2024. Then, the Owners applied to sell the cargo, invoking Section 44 of The Arbitration Act of 1996. At that time, the cargo was being held in a warehouse owned by the Receivers, who were acting as agents of the Owners for “storage purposes”. Scientific reports provided evidence of the cargo’s rapid deterioration and rampant mold, as well as insect infestation(s).Further, both the Charterers and the Receivers failed to appear at the arbitration hearing, which the presiding judge counted as refusal to participate. It was confirmed that the Owners had a right to sell under Section 44 of the Arbitration Act of 1996.

Relevant Clauses

Section 44(1) granted the court identical powers to those it would have in judicial proceedings – meaning, the court was allowed to utilize the powers outlined in CPR Part 25. CPR 25(1)((c)(v) allowed for the “sale of relevant property…when there’s a good reason to sell it quickly”. Without the sale, the value of the lien would have decreased dramatically, hence why the sale was necessary and this is a “paradigm” case.

Section 44(2)(d) authorized the “sale of any goods” involved in the proceedings

Section 44(3) clarified the course of action if the Parties and the Tribunal could not reach an agreement, stating “if the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.”

Discussion

Per Section 44(3) and the ruling in Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars) [2017] 2 Llloyd’s Rep 409, both of which established a contractual lien’s ability to act as security during active arbitration when it involves goods subject to or involved in the arbitration. In Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars), the cargo (oil) was non-perishable, but had remained onboard the damaged vessel for over nine months, and would have remained there indefinitely without the order for sale.

In the present arbitration, the cargo was rapidly deteriorating, which justified its sale. The Owners’ lien took precedence over the Receivers’ claim against the Charterers, given that they never received the bill of lading. Further, even if it had reached the lawful owner, the Owners’ lien would have prevailed.

The outcome if the bill of lading had been released was also considered. Had the freight still been incorrectly marked “Prepaid”, the Owners’ claim might have been rendered invalid as there was not a balance owed. In this circumstance, there would not have been a freight lien to leverage against as security. However, in actuality, the Owners managed to retain Ownership, despite not delivering the bill of lading, through appointing the Receivers as their agents for “storage purposes” – i.e. after the cargo was unloaded, it was stored in a warehouse owned by the Receivers.

Additionally, it was noted how uncommon/unusual it is for the cargo to be owned by the Charterer. 

Decision/Award

The Owners’ lien prevailed and the sale of the cargo was ordered in return for the undertaking by the Owners, damages of US$75,000 were awarded.