Legal Opinion Summary

Factual and Procedural Background

The dispute arises from a time-charter dated 2 June 2006 between the Appellant (shipowner) and the Respondent (charterer). Under the Shelltime 3 form the Respondent hired a VLCC for 36 months with a contractual right for the Appellant to withdraw the vessel if hire was unpaid. No anti-technicality provision was included.

The Respondent failed to pay hire due on 31 May 2008. At 14:41 GMT on 2 June 2008 the Appellant lawfully withdrew the vessel while she was in The City having loaded a parcel of the Respondent’s cargo. Negotiations to reinstate the charter failed. The Appellant directed the Respondent to arrange discharge; the cargo was finally discharged at 06:00 GMT on 5 June 2008, detaining the vessel for 2.64 days instead of one.

The Appellant claimed remuneration for the detention period and bunkers consumed, advancing four alternative legal bases: (i) clause 13 (indemnity), (ii) a new post-withdrawal contract, (iii) unjust enrichment, and (iv) bailment. Judge Smith allowed recovery on bailment only; the Court of Appeal rejected all bases except the cost of bunkers used in discharge. The Appellant appealed and the Respondent cross-appealed on the bunkers point.

Legal Issues Presented

1. Does clause 13 of the charterparty indemnify the Appellant for time and bunkers consumed while the vessel was detained for discharge after lawful withdrawal?
2. Was a new contract (express or implied) formed after withdrawal obliging the Respondent to pay market hire?
3. In the absence of contract, can recovery be framed in unjust enrichment?
4. Is the Appellant, as non-contractual bailee, entitled at common law to reimbursement for safeguarding and discharging the Respondent’s cargo?

Arguments of the Parties

Appellant’s Arguments

• Clause 13 covers “all consequences” of complying with the Respondent’s order to load; the post-withdrawal detention and bunker usage are such consequences.
• Alternatively, the parties’ exchanges created a new contract at the higher market rate.
• Further or alternatively, the Respondent was unjustly enriched by continued storage of its cargo on the vessel.
• In any event, bailment principles entitle the Appellant to recover necessary costs incurred while responsibly caring for the cargo.

Respondent’s Arguments

• The loss resulted solely from the Appellant’s commercial election to withdraw; any detriment is for the Appellant’s account.
• Clause 13 applies only during performance of the chartered service; once withdrawn, no indemnity is available.
• No consensus was reached for a fresh contract.
• The circumstances do not satisfy requirements of bailment, agency of necessity or unjust enrichment.

Table of Precedents Cited

Court’s Reasoning and Analysis

Indemnity (majority view): Judge Sumption, joined by Judges Walker, Phillips and Clarke, held that the Respondent’s order to load was an effective cause of the subsequent detention because the cargo remained on board when the charter ended. The owners’ election to withdraw merely fixed the place of discharge; it did not break the causal chain. Detention to discharge cargo was outside the “ordinary risks” the Appellant had agreed to bear, so clause 13 indemnified the Appellant for market-rate hire and bunkers over 2.64 days.

Bailment: Even if the indemnity failed, the Appellant, as non-contractual bailee, owed a continuing duty of care. Under The Winson line, where a bailee cannot avoid expense in fulfilling that duty, the bailor must reimburse. The same necessity existed here, independently entitling the Appellant to recover.

No New Contract: Both lower courts correctly found no consensus on new terms; the Supreme Court agreed.

Unjust Enrichment: Potentially available but unnecessary to decide.

Dissent on Clause 13: Judge Mance accepted bailment recovery but rejected the indemnity claim, reasoning that the proximate cause of loss was the Appellant’s voluntary withdrawal, and extending clause 13 post-termination would create uncertainty and over-compensate owners.

Holding and Implications

HELD: The appeal is ALLOWED. The order of Judge Smith is restored, awarding the Appellant market-rate hire for 2.64 days and full bunker costs.

Implications: The judgment confirms that a standard time-charter employment and indemnity clause can extend to costs incurred after withdrawal when cargo remains on board, and that bailment provides an independent route to recovery. The decision clarifies causation principles in maritime indemnities and may influence future drafting of anti-technicality clauses and risk allocation under time charters.