UK: Could Owners Be Liable For Conversion By Retaining Bunkers On Board The Vessel After Withdrawal?

Last Updated: 2 July 2013
Article by Fionna Gavin and Murphy Mok

Daebo Shipping Co Ltd v. The Ship GO STAR [2012] FCAFC 156

The Federal Court of Australia recently considered whether, as a matter of English law, Head Owners could be liable to Disponent Owners for conversion or detinue as a result of retaining bunkers on board the vessel after lawful withdrawal from the head charter. The Court also dealt with a claim for interference with Disponent Owners' contractual relations, arising from various notices sent by Head Owners to the Charterers at the end of the chain.

The background facts

The vessel was chartered under a string of time charters on the 1981 NYPE form in the following charterparty chain: SA - BMS - Bluefield - Daebo - Nanyuan.

All charters were on substantially back-to-back terms, with English law to apply and Clause 31 reading:

 "31. Charterers to take over and pay together with first hire payment bunkers upon vessel's delivery. ... On redelivery bunkers same quantities and same price both end."

Daebo chartered the vessel to Nanyuan in December 2008, with delivery on 3 January 2009. The vessel sailed to the loading port between 3 - 8 January 2009. By that time, BMS had defaulted in hire payment under the head charter. Given this, SA informed Nanyuan of their intention to withdraw the vessel and advised Nanyuan "not to pay any sum as [they] may be called upon to pay twice over such sum".

Nanyuan accordingly withheld payment of the first hire sum and the value of bunkers on board, which had become due under the sub-charter. They also purported to cancel or withdraw from the sub-charter, arguing that SA's threat to exercise a lien on sub-hire meant the vessel was not lawfully ready in all respects at the time of delivery and, therefore, was never lawfully delivered.

Shortly thereafter, SA withdrew the vessel under the head charter. Daebo demanded redelivery of the bunkers on board the vessel (for which they had not been paid by Nanyuan), but SA refused.

 Daebo commenced proceedings against SA for:

  1. Damages in conversion and detinue in respect of the vessel's bunkers; and
  2. Damages in respect of the payments withheld by Nanyuan, on the basis that SA had unlawfully interfered with the performance of the sub-charter.

At first instance, the primary Judge dismissed Daebo's action on both counts. Daebo appealed.

The Federal Court of Australia decision

(1) Claim for conversion and detinue

The Judges on appeal upheld the primary Judge's decision that Daebo had no claim for conversion or detinue since they had no title in the bunkers at the time of the alleged conversion.

In reaching this decision, the Judges set out the position under English law regarding NYPE and similar forms of charter that, on delivery of the vessel, property in the bunkers passes to the charterers together with the obligation to pay for bunkers. Delivery occurs when owners place the vessel at charterers' disposal.

This position was found to be consistent with the operation of Clause 31 in the sub-charter, which required Nanyuan to "take over and pay together with first hire payment bunkers upon vessel's delivery". The Court found that once the vessel was delivered by Daebo to Nanyuan, Nanyuan did not have to perform any particular act to "take over" the bunkers under Clause 31. Neither could Nanyuan assert that they had not taken over the vessel and its bunkers by then.

The Court also dismissed Daebo's argument that property in the bunkers did not pass since Nanyuan did not pay for the bunkers within three banking days of delivery as required under the recap. Such clause, in the Court's view, merely reflected a commercial allocation of risk for any non-payment that fell on Daebo; it did not delay the passing of property in the bunkers under Clause 31 until the bunkers were paid.

Accordingly, Nanyuan obtained title to the bunkers upon the vessel's delivery on 3 January 2009, and Daebo's appeal on this issue was dismissed.

(2) Claim for interference with Disponent Owners' contractual rights

The Court reversed the primary Judge's finding on this point and held that SA unlawfully interfered with Daebo's contractual rights under the sub-charter by urging Nanyuan not to pay the sums owing under that charter.

In the Court's reasoning, the first question to be decided was where, as a matter of fact, the relevant communications took place. The Court found that SA communicated with Nanyuan's agents in both China and Singapore, but it was the latter instance that was relevant to this issue. As such, the law of China did not apply. Furthermore, in the absence of proof by SA that the laws of Singapore and Australia differed in respect of interference with contractual relations, the Court applied the latter in default of the law of some other place.

Applying Australian law to the facts, the Court found SA's conduct in urging Nanyuan to refrain from making payments constituted unlawful interference with Daebo's rights under the sub-charter. The Court was satisfied that SA had the necessary intention to, and did, induce the breach of the sub-charter whilst knowing that such a breach would interfere with Daebo's contractual rights. To this end, the Court highlighted two points:

  1. SA had no claim to a lien over payment for bunkers under the sub-charter, which was not in the nature of freight or hire but a debt due on a sale of property; and
  2. SA did not assert any lien directly by requiring Nanyuan to pay hire. The statement to "not to pay any sum" did not amount to a notice of exercise of any lien that SA had.

Given this, the Court allowed the appeal on this issue and Daebo were entitled to recover damages in the sum covering unpaid hire and unpaid value of the bunkers at the rates under the sub-charter, plus interest.


The case is a useful reminder that when contracting on standard NYPE and similar forms, the property in bunkers on board will pass to charterers at the time of the vessel's delivery, but will not pass back to owners if the vessel is withdrawn rather than redelivered. Owners, therefore, risk claims from third party owners of bunkers after withdrawal unless the charter provides for property in the bunkers to revert to owners in this event.

Whilst the Charterers succeeded in recovering both for bunkers and unpaid hire in this case, the decision also highlights the risk that, if a vessel is withdrawn under a head charter, where charterers lower down the chain do not themselves have title to the bunkers (despite having paid for them), they may be unable to recover the bunker costs from owners. Given the growing use in time trip charters of provisions entitling charterers to pay for bunkers consumed at the end of the voyage, it is important for disponent owners to ensure they are adequately protected in this situation.

Finally, although the facts of this case are unusual, they illustrate that head owners should exercise caution in drafting communications to sub-charterers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.