Where a disponent owner exercises its power of lien over its voyage charterer’s cargo and subsequently obtains an order for sale of the cargo, what rights will that disponent owner have over the proceeds of sale?


Silver Rock Investments, the voyage charterer of the vessel CLIPPER MONARCH, failed to make a payment of freight and demurrage due to Castleton Commodities Shipping (CCS) as the disponent owner. Acting in reliance on a clause in the voyage charter which provided that “owners shall have a lien on the cargo for freight, deadfreight, demurrage and damages for detention”, CCS ordered the vessel to anchor in international waters until the payment was received from Silver Rock.

When payment was not forthcoming, CCS obtained an order from the English High Court that Silver Rock’s cargo should be sold and the proceeds “treated as if subject to the same rights (if any) as the claimant had in respect of the goods prior to their sale.”

There was some uncertainty as to whether the cargo was owned by the shipper or Silver Rock at the time the sale order was made. Accordingly CSS secured an assignment of the carrier’s rights under the bills of lading which incorporated the voyage charter’s lien clause.

CCS obtained arbitration awards against both Silver Rock and Grupo Minero, the seller of the cargo to Silver Rock, in respect of the freight and demurrage and these awards were converted into High Court judgments for the purposes of enforcement. CCS then applied to the High Court for an order that the sale proceeds be released to it.

The judgment

The court accepted that CCS was entitled to the sale proceeds on the basis that it was a judgment creditor of both Grupo Minero and Silver Rock, the two possible owners of the cargo. However, the court also found that CCS’s rights derived from the exercise of its lien over the cargo, conferred an alternative right to the proceeds of sale. Although the judge did not explore this issue in detail, he decided that:

  1. The cargo was either bound by a non-possessory lien in favour of CCS as disponent owner under the voyage charter, or a possessory lien in favour of the carrier, of which CCS was the assignee, arising under the bills of lading.
  2. CCS had exercised its non-possessory lien over the cargo by ordering the vessel not to proceed to its discharge port and the carrier had exercised its possessory lien by following this instruction.
  3. In the circumstances of this case, “the rights of lien, which pre-existed the sale, can be said to have been transformed into a right to the proceeds of sale of the cargo concerned”. The judge did not seem to think it mattered whether the lien which bound the cargo prior to the sale was a possessory or non-possessory lien.
  4. Accordingly, CCS was entitled to be paid out of the proceeds of the sale up to the amount of the debt by reference to which the lien was exercised.


For owners who are chasing recalcitrant voyage charterers for payment, the judgment is significant in two ways:

  1. Owners can be confident that if the cargo is perishable, or some other applicable ground applies the court will be prepared to order the sale of the cargo under CPR Part 25.
  2. The judgment suggests that it may not be necessary for owners to obtain an arbitration/court judgment in order to obtain an order for sale, and that in certain circumstances owners may become entitled to such an order simply by exercising their rights of lien.

HFW’s perspective

As the judge found for CCS on the “judgment creditor” grounds, the “lien grounds” are arguably obiter and are not therefore binding authority in respect of the above points. Nonetheless the case indicates that the rights of a lienholder may extend beyond the mere right to possession of the cargo, opening up a new avenue through which owners can obtain payment of sums owed by charterers.

HFW Partner Brian Perrott and Senior Associate Patrick Knox acted for the successful applicant.