In brief – No bond for cargo provided by consignee

In the case Metall Market v Vitorio Shipping, it was held on appeal that the vessel’s owner was entitled to refuse to deliver the cargo and was also entitled to recover all expenses associated with it.

Only 9% of cargo of steel coils insured on "The Lehmann Timber"

The case Metall Market OOO v Vitorio Shipping Co Ltd ("The Lehmann Timber") [2013] 2 Lloyds Rep 541 involved the vessel "The Lehmann Timber", which was carrying a cargo of steel coils for discharge at St Petersburg. The plaintiff was the consignee.

Steel coils were carried under four bills of lading but only the cargo under the fourth bill of lading (comprising some 9% of the total cargo) was insured.

Consignee liable for 29% of costs of two general average incidents

On route from China to St Petersburg two general average incidents took place. Firstly the vessel was captured by pirates and held for 42 days off Somalia until a substantial ransom was paid. On her release the vessel suffered a main engine breakdown and had to be towed.

The general average adjusters decided that both the payment of the ransom and the cost of the tow were allowable general average disbursements, totalling over US$3.5 million. The consignee was liable for 29% of that total.

Vessel sails to Finland and cargo discharged into warehouse subject to lien

When the vessel arrived at St Petersburg, no bond had been provided by the consignee and only an insurer's guarantee had been provided for the cargo under the one bill of lading that was insured.

The owners of the vessel, wishing to retain their lien on the cargo and, being advised that if the vessel berthed they would be forced to discharge its cargo, sailed to Finland, where they discharged the cargo into a warehouse subject to their lien.

Arbitrators had found that the amount and form of security which had been sought by the owner was reasonable and that the consignee's failure and refusal to provide the missing security was unreasonable.

Appeal overturns first instance decision that consignee not liable to pay shipowner’s costs

At first instance it was held that the owner of the vessel was entitled to exercise a lien on the cargo, but the consignee was not liable to pay the costs incurred by the shipowner in preserving and caring for the liened cargo.

On appeal it was held that the owner was entitled to refuse to deliver the cargo, despite receiving and retaining the insurer's guarantee covering the general average liability, and was also entitled to recover all the expenses associated with the storage and taking care of the cargo.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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