regard it as unacceptable. In short, the subjective approach is incompatible with the
traditional objective approach to construction of a contract.
22
With regard to the shipowner’s duty to act reasonably in the context of a lien
clause in a charterparty, reference must be made to three cases. One is a relatively old
judicial decision; the other two are arbitration awards. In The Lyle Shipping Company Limited v. The Corporation of Cardiff,
23 the vessel in question was voyage
chartered on terms which included a lien clause. The dispute arose out of the loading
port demurrage. The shipowner claimed 22 days demurrage, but the charterer
recognized only 3 days as being subject to demurrage payment. In the end, the
court upheld 19 days demurrage. The charterer contended that the shipowner had
lost the lien because the amount he claimed was greater than what was justifiable.
Furthermore, the cargo receivers claimed that the plaintiff shipowner wanted to
“squeeze” the defendant charterers, that is, to apply extortion by exercising their
lien to get more than what they were legally entitled to receive. But Bigham
J. rejected the charterer’s argument and stated—“I do not think that was their
intention (squeeze), or that they intended to exercise the lien for anything to which
they had no right. . .the plaintiffs (the shipowner) were disposed to act reasonably.”
Clearly, in this case, reasonableness of action taken by the shipowner was factored
into the court’s decision. It would therefore appear that there is an implied duty on a
shipowner exercising his right under the lien clause to act in a reasonable manner in
doing so.
In a London Maritime Arbitration case, the shipowner and charterer contracted
for three successive periods under three separate charterparties. On grounds of
failure by the charterer to make prompt payment of sums due under each
charterparty, the shipowner exercised his lien over the cargo remaining on board
by ordering the vessel to stop discharging. The charterer took the position that the
shipowner wrongfully exercised the lien and contended that the shipowner could
exercise his lien in respect of the third charterparty without including the first two.
The value of the remaining cargo was more than the amount due in respect of the
third charterparty. The tribunal held that although the shipowners’ lien could not
extend to the two earlier charterparties, the lien over the remaining quantity of cargo
was valid.
24 It is apparent that in rendering its award, the tribunal considered the
shipowner to have acted reasonably in the circumstances.
The third one is also a London Maritime Arbitration case in which the owners had
declared general average during the voyage. The master exercised a lien over the
cargo on board at the discharge port after the receivers refused to sign general
average bonds. The tribunal ruled that the lien must be exercised in “a reasonable
manner”, and that the costs of the various alternative methods of exercising the lien
must be taken into account when determining whether it had been exercised
22 Lord Neuberger (2016) Para. 16, p. 17.
23 [1899] 5 Com. Cas. 87, at pp. 97–98; see also Cooke et al. (2014) Chapter 17.26.
24 See London Maritime Arbitration 5/91, in Lloyd’s Maritime Law Newsletter (LMLN 307) A
summary award can be found in Steamship Mutual (1999).
318
S. Jia and H. Yu
traditional objective approach to construction of a contract.
22
With regard to the shipowner’s duty to act reasonably in the context of a lien
clause in a charterparty, reference must be made to three cases. One is a relatively old
judicial decision; the other two are arbitration awards. In The Lyle Shipping Company Limited v. The Corporation of Cardiff,
23 the vessel in question was voyage
chartered on terms which included a lien clause. The dispute arose out of the loading
port demurrage. The shipowner claimed 22 days demurrage, but the charterer
recognized only 3 days as being subject to demurrage payment. In the end, the
court upheld 19 days demurrage. The charterer contended that the shipowner had
lost the lien because the amount he claimed was greater than what was justifiable.
Furthermore, the cargo receivers claimed that the plaintiff shipowner wanted to
“squeeze” the defendant charterers, that is, to apply extortion by exercising their
lien to get more than what they were legally entitled to receive. But Bigham
J. rejected the charterer’s argument and stated—“I do not think that was their
intention (squeeze), or that they intended to exercise the lien for anything to which
they had no right. . .the plaintiffs (the shipowner) were disposed to act reasonably.”
Clearly, in this case, reasonableness of action taken by the shipowner was factored
into the court’s decision. It would therefore appear that there is an implied duty on a
shipowner exercising his right under the lien clause to act in a reasonable manner in
doing so.
In a London Maritime Arbitration case, the shipowner and charterer contracted
for three successive periods under three separate charterparties. On grounds of
failure by the charterer to make prompt payment of sums due under each
charterparty, the shipowner exercised his lien over the cargo remaining on board
by ordering the vessel to stop discharging. The charterer took the position that the
shipowner wrongfully exercised the lien and contended that the shipowner could
exercise his lien in respect of the third charterparty without including the first two.
The value of the remaining cargo was more than the amount due in respect of the
third charterparty. The tribunal held that although the shipowners’ lien could not
extend to the two earlier charterparties, the lien over the remaining quantity of cargo
was valid.
24 It is apparent that in rendering its award, the tribunal considered the
shipowner to have acted reasonably in the circumstances.
The third one is also a London Maritime Arbitration case in which the owners had
declared general average during the voyage. The master exercised a lien over the
cargo on board at the discharge port after the receivers refused to sign general
average bonds. The tribunal ruled that the lien must be exercised in “a reasonable
manner”, and that the costs of the various alternative methods of exercising the lien
must be taken into account when determining whether it had been exercised
22 Lord Neuberger (2016) Para. 16, p. 17.
23 [1899] 5 Com. Cas. 87, at pp. 97–98; see also Cooke et al. (2014) Chapter 17.26.
24 See London Maritime Arbitration 5/91, in Lloyd’s Maritime Law Newsletter (LMLN 307) A
summary award can be found in Steamship Mutual (1999).
318
S. Jia and H. Yu