The Kos

The right to withdraw a time chartered vessel in the event of non-payment of hire is a potent weapon in the shipowner’s arsenal. However, when the right to withdraw arises it is likely to be the case that the vessel is carrying cargo for which shipowners’ bills of lading have been issued. If these are “freight prepaid” bills the shipowner will be obliged to perform the voyage without being able to recover freight from the lawful holder of the bill. Can the shipowner then turn to the defaulting charterer to recover the market rate for the vessel while the shipowner is fulfilling the contract contained in the bill of lading? There can be no recovery by way of damages, for the failure to pay an instalment of hire does not go to the root of the contract so as to justify termination—this can be achieved only through the contractual option in the withdrawal clause.1 If after the withdrawal the charterer requests the shipowner to continue with the voyage, then a new contract may be held to arise, as found by Goff J in The Tropwind (No 2).2 The rights of a shipowner against a time charterer in relation to losses it sustains post-withdrawal have now been considered in The Kos,3 which involved a withdrawal during the course of loading of a cargo for the charterer’s account. No third-party bill of lading holders were involved, so there was no obstacle to the owners’ offloading the cargo. As well as claiming by way of a new contract, the owners explored a new avenue of claim for this period of detention—by way of indemnity. They also advanced their claim in bailment and unjust enrichment.

The MT Kos, a VLCC, was time chartered to Petroleo Brasileiro SA on 2 June 2006 for three years. The charterparty contained a standard withdrawal clause, with no anti-