Lloyd's Maritime and Commercial Law Quarterly
LIENS ON SUB-FREIGHTS
Re Brumark
Many time charters include a lien clause which gives the owner a “lien” on sub-freights payable to the charterer by the cargo interests to secure the payment of the hire due to the owner from the charterer. Thus, cl. 18 of the New York Produce Exchange charter provides that “the owners shall have a lien upon all cargoes, and all sub-freights for any amounts due under this charter…”. Although the lien on cargo is a common law possessory lien, because the owner has possession of the cargo whilst it is on board the ship, the “lien” on sub-freights is neither a common law possessory lien nor is it an equitable lien.1
Nor indeed is it a maritime lien, since a maritime lien can only arise in relation to a defined class of claims and attaches to the ship or the cargo.2
The lien on sub-freights is a right given by contract by the charterer to the owner which the owner would not otherwise have. It gives the owner the right to attach to sub-freights payable to the charterer3
if the hire due to the owner from the charterer has not been paid. The lien is exercised by the owner’s giving notice to the person by whom the sub-freight is payable requiring him to pay it direct to the owner. This is how the lien operates in practice and until June 2001 the courts had categorized the lien as an equitable charge. However, this analysis was questioned by the Privy Council in Re Brumark Investments Ltd,
4
in which Lord Millett expressed the view that the lien was a “contractual non-possessory right of a kind which is sui generis
”.
Whether the lien on sub-freights is an equitable charge or a legal right sui generis
may be an interesting academic question but, in practical terms, as long as the owner can attach the sub-freight the issue has little relevance except in two situations. First, if the charterer is a limited company incorporated under the Companies Act 1985, then, if the lien is an equitable charge, it will constitute a charge on book debts and will be registrable under the Companies Act 1985, s. 395—the consequence of non-registration being invalidity against other creditors of the charterer. If the lien is a legal right sui generis,
then it is not so
1. See Halsburys Laws of England,
4th edn, Vol. 28: Liens
(1997).
2. Maritime liens arise in relation to claims for salvage, collision damage, crews’ wages and master’s disbursements: see D.Jackson, Enforcement of Maritime Claims,
3rd edn (LLP, 2000), Chap. 18.
3. If the bill of lading contract is between the owner and the cargo interests then the sub-freight is payable to the owner as a matter of contract: see Molthes Rederi Aktieselskabet
v. Ellermans Wilson Line Ltd
[1927] 1 K.B. 710, 717, per
Greer, J. See also Wehner
v. Dene Steam Shipping Co.
[1905] 2 K.B. 92.
4. Agnew
v. Commissioner of Inland Revenue
[2001] U.K.P.C. 28; [2001] 3 W.L.R. 454 (more commonly known as Re Brumark Investments Ltd).
See generally D.Capper, “Fixed Charges Over Book Debts—Back to Basics but How Far Back:” [2002] LMCLQ 246.
289