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CLAIMS FOR UNPAID BUNKER DUES
WHEN SUPPLY REQUISITIONED AT THE
BEHEST OF TIMECHARTERER
SHIPARRESTININDIMay
2012,PublishedbyBrusChambers,Advocates&Solicitors,Mumbai,India
Sector:Admiralty,ShippingandMar_____________________________________________________________________________________________
Dr. Shrikant Hathi, partner and Ms. Afia SenGupta, with Indian
law firm BRCHAMBERS,analyse
thesituationwherebunkersuppliersclaimremainsunpaidwhenbunkerrequisitionedbymasterofashipwhiletheshipistimecharteredandthealsowhenrequisitionisthebehestofthetimecharterer.UnpaidduesofBunkerSuppliersaresecuredbyamaritimeclaand/orarighttoarrestthevesselinrem
Division Bench of the Bombay High Court allowed theappeal filed
by bunker supplier, Chemoil Adani Pvt Ltd forunpaid bunker dues,
the order of arrest of the vessel m.v.Hansa Sonderburg was upheld,
the order passed by thesingle judge vacating the order of arrest of
the vessel wasreversed in appeal on April 27, 2010 confirming the
order ofarrest of the vessel as prima-facie case was made out
andthe arrest was justified.
Although the appeal court was of the view that the
appellantbunker supplier cannot be shut out at prima facie stage
andthe single judge vacating the order of arrest proceeded
toanalyse the case and rendering conclusive findings at thenterim
stage was not permissible at an interlocutory stage.
Chemoil Adani Pvt Ltd filed an admiralty suit in the BombayHigh
Court against the vessel m.v. Hansa Sonderburg, theowner of the
vessel Hansa Sonderburg Shipping Corp andthe time charterer of the
vessel Hull & Hatch Logistics LLC.The suit was filed for unpaid
bunker dues. Bunkers weresupplied at the request of the master of
the vessel m.v.Hansa Sondersburg, further, the supply was made in
terms
of the agreement between the bunker supplier and the tcharterer
of the said vessel.
During the charter, the vessel was in need of bunker.
Time Charterer of the vessel enquired from the bunsupplier as to
whether they are ready to supply bunkAfter negotiation, the terms
of supply were agreed inexchange of emails between the bunker
supplier and tcharterer, the terms were agreed on June 26, 2009.
master of the said vessel had made a request to the bunsupplier on
July 5, 2009 for supply of 800MT of bunkethe vessel for the purpose
of its onward journey to Eden.
The bunker came to be supplied under a bunker delivnote dated
July 5, 2009. The bunker receipts were dacknowledged by the master
of the vessel on the bundelivery note and also by a landing
certificate dated Jul2009 thereafter a detailed invoice dated July
5, 2009 wdelivered. There was a default in payment; suit was
filedOctober 19, 2009 and an exparte order of arrest of vessel was
passed by the single judge.
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The vessel owner made an application for vacating theorder of
arrest before the single judge on the ground thatthe bunker
requisition was made at the behest of the timecharterer and it is
the responsibility of the time charterer toarrange and pay for the
bunkers. The ship owner urged thatthe bunker supplier has no
privity of contract with the vesseland the owner of the vessel. The
contract of the bunker isonly with the time charterer and in the
absence of any privityof contract the bunker supplier cannot have
any right toproceed against the vessel in rem and the owner of
thevessel in personam. The order of arrest was accordingly
vacated by the single judge and vessel was ordered to bereleased
but the order of release of the vessel was reversedn appeal.
The bunker supplier the appellant in appeal urged thatwhether
the terms and conditions of the contract betweenthe bunker supplier
and time charterer would bind the shipand the ship owner or not,
what are the legal repercussionsof the stipulations in the bunkers
delivery note and what isthe legal consequence of the
acknowledgment of thesupplies by signing bunkers delivery note are
matters whichcannot be decided at an interlocutory stage. Bunker
supplierfurther urged in appeal that at this interlocutory stage,
they
need not prove that supply was on the credit of the vessel.In
any event, the documentary evidence was producedwhich would
demonstrate that the bunkers were suppliedagainst the Masters
requisition for the benefit of the vesseland the supply of bunkers
to the vessel is acknowledgedand evidenced by the bunker delivery
note also signed byMaster/Chief Engineer of the vessel. As to
whether theMasters signature was necessary and whether the
ChiefEngineer had the authority to sign the same or not arematters
which cannot be gone into and decided at annterlocutory stage. The
appellant bunker suppliers casewas clear. The requisition was made
by the Master but theacknowledgment /delivery note was signed by
the
Master/Chief Engineer. In such circumstances, whosesignature
binds the vessel is something which the learnedJudge could not have
conclusively decided at interlocutorystage.
Why it matters:
Bunker suppliers legal position is unclear as regards
theirclaims under admiralty law when supplies are made at thebehest
of time charterer while legal position is differentwhen supplies
are requisitioned by master of the vessel orby the vessel
owner.
Certain countries, such as Holland, India as well as at
least
some court districts in France, apply a less strictnterpretation
of the Arrest Convention and allow arresteven in cases where the
debtor is not the owner of thevessel. English law does not
recognise the concept of amaritime lien for necessaries (charges
for goods andservices rendered to the vessel). Therefore, an
unpaidbunker supplier would not enjoy a maritime lien as a matterof
English law. However, under US maritime law, such abunker supplier
does have a maritime lien.
Ship owners should be aware that if charterers sdefaulting under
the charterparty, they are also likely todefaulting on payments to
suppliers of bunkers and oservices, exposing the vessel to
enforcement actions aresult. Bunker suppliers have experienced the
impacdefaulting charterers but the tide has turned in so
jurisdiction.
Unpaid bunker dues requisitioned by master of a ship thatime
chartered, is a maritime claim and can be arrestedthe master is
first and foremost the ship own
representative, he has more or less the same authoritiesa ship
owner himself but he is obliged to contact the sowner if possible
before making a major decision.
It is the masters responsibility to make the vessel readysailing
before the commencement of a voyage. Thisexample means that
sufficient supplies of adequate fand water are brought onboard, the
master is aresponsible for the seaworthiness of the vessel when
voyage commences and that the vessel continues toseaworthy during
the voyage. Whether the vesseseaworthy or not is decided by the
master. The duty of master to supervise the seaworthiness of the
vessel a
means that he is obligated to refuse to carry out the ordof the
charterer or shipowner, in case their assessmenthe seaworthiness is
not compatible with his. If the chartor the shipowner does not
respect this it is possibleprosecute each of them as an instigator
or accessory.
The master also shall supervise the loading and discharging of
the vessel. (The actual supervision is ocarried out by the first
officer.) It is also his responsibilitmake sure the voyage is
performed as swiftly as posswithout time loss. The charterer can
have a great influeon the circumstances surrounding the voyage but
master is the person who is primarily responsible for
performance of the voyage.
The Master need not obey orders given by Charterers ofvessel if
it is, or at the material time he reasonably beliethat it is,
unsafe for him to obey them; or they call upon to perpetrate or to
facilitate a fraud upon, or commit a torelation to, or break a
contract with, a third party; or they manifestly inconsistent with
the express or implied termthe charterparty. The master has got
several assignmeon board. He is principally responsible for
seaworthiness of the vessel, both at the time of departure and
during the voyage. The master has got legal right to refuse to obey
orders that will jeopardize seaworthiness and sometimes he is even
obligated
refuse to obey such orders.
The master is responsible for the day-to-day operationthe vessel
while the shipping company has the ultimresponsibility.
Section 4 of the ISM-Code Designated Person(s) readsTo ensure
the safe operation of each ship and to providlink between the
company and those on board, evcompany, as appropriate, should
designate a personpersons ashore having direct access to the
highest leve
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management. The responsibility and authority of thedesignated
person or persons should include monitoring thesafety and pollution
prevention aspects of the operation ofeach ship and to ensure that
adequate resources and shorebased support are applied, as
required"
Bunker oil is necessary goods and supplies for ship. If it
isconclusively shown that necessaries supplied or servicesrendered
to any ship are prima facie 'necessaries' and arewithin the
category of necessaries within the scope andambit of section 5 of
Admiralty Courts Act, 1861, admiralty
action will lie. The concept of "necessaries" goods andmaterials
supplied or services rendered to a ship for heroperation and
maintenance. The operation of the ship wouldnecessarily include
operation of ship necessary for voyageand sea worthy necessarily
include necessaries includingbunkers, for the vessel to be
seaworthy fromcommencement and continues to be seaworthy during
thevoyage. Bunker fuel oil is used mainly in powering ships.
A common feature of bunker supply contracts is that
bunkersuppliers frequently allow all or part of the purchase price
tofall due some time after delivery of the bunkers. One reasonwhy a
bunker supplier may be willing to grant such credit is
that the amount owing may be secured by a maritime claimand/or a
right to arrest the vessel in rem to which thebunkers were supplied
or her sister ship.
Owners trading vessels in the spot market purchbunkers on their
own account. In such circumstancfulfilment of the payment
obligations under the bunsupply contract will be within owners
control. If, howethe vessel is chartered out on a time or bareboat
charbunkers will normally be purchased by the charterersuch cases,
owners have no control over the purchasfulfilment (or not) of the
payment obligations under bunker supply contract. And if the
purchaser defaults, may lead to actions against the vessel by the
bunsupplier.
In many other jurisdictions, while the bunker suppliers clwill
not be secured by a maritime lien, it may qualify amaritime claim,
which may entitle the bunker suppliearrest the vessel to which the
bunkers were supplied
BRUS CHAMBERS
Advocates & Solicitors8, Rajabahadur Mansion, 3
rdFloor, Ambalal Doshi M
Fort, Mumbai 400001, India.Contact Partner: Shrikant HathiMob:
+91-976-9946865
Off: +91-22-22659969Email: [email protected]:
bruschambers.com
