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23. Lien. The Owners shall have a lien upon all cargoes and ail sub-freights and/or sub-hire for any amounts due under this Charter Party, including general average contributions, and the Charterers shall have a lien on the Vessel for all monies paid in advance and not earned, and any overpaid hire or excess deposit to be returned at once. The Charterers will not directly or indirectly suffer, nor permit to be continued, any lien or encumbrance, which might have priority over the title and interest of the Owners in the Vessel. The Charterers undertake that during the period of this Charter Party, they will not procure any supplies or necessaries or services, including any port expenses and bunkers, on the credit of the Owners or in the Owners’ time.

NYPE. Clause 23. Lien
Last updated: 21-Jun-2015

Per Clarke J in Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS & Ors [2012] EWHC 1224 at paras 32-52:

32. The true nature of the lien provided for in the amended NYPE form, has still not been determined by any appellate tribunal whose judgment is binding on me. Decisions as to its nature have been reached by judges at first instance of great distinction (Lloyd, Nourse, Saville, Steyn and Kerr JJ) and obiter by Lord Russell of Killowen; but a contrary view has been expressed, probably obiter, by Lord Millett in a Privy Council decision.
33. Mr Jacobs suggested that, since the question was one of law and affected whether relief could be given, it was or might be necessary for me to decide it: see the cases referred to at Dicey and Morris 11.15 footnote 13. In Hutton & Co v Mofarrij [1989] 1 WLR 488, 495 LJ said that a plaintiff could rely on the concept or test of good arguable case only in situations which leave room for further investigation of issues of fact or of mixed fact or law as to whether or not some requirement of Order 11 was satisfied. Whether or not Owners have any right in the nature of an assignment of CMT’s claims against OceanTask (or OceanTask’s claims against SeaTask) does not seem to me to fall within that category.
34.Certain matters can be stated. A lien over sub-hire is a right to receive sub-hire as hire and to stop it at any time before it has been paid to the time charterer or his agent: Tagart v Fisher [1903] 1 KB 391 at p 395 per Lord Alverstone CJ (a case on sub-freight). In that case the freight due under the bill of lading had been paid to the charterers, whose bill it was. Earl Halsbury said that: "the right over the freight must be exercised at a time when there is freight to be paid as such, and ... when the freight has once been paid the lien is gone" and that "the right to stop the payment of freight to the person to whom it is due must be exercised while the right for such payment exists".
35. The shipowner perfects his right of lien by giving notice to the sub-charterer that he is exercising his lien. If the sub-charterer has already paid the charterer by the time the notice is given, the lien fails to bite on anything: The Spiros C [2000] 2 Lloyd’s Rep 319, para 11, per Rix LJ.
36. There have been said to be two realistically possible juridical bases for the lien: a) It operates as a form of equitable assignment by the charterer by way of security for payment of what is owed to the owner (which may or may not constitute an equitable charge); and b) It confers a sui generis personal contractual right of interception analogous to an unpaid seller’s right of stoppage in transitu.

Equitable assignment.

37. The problem arises because of the use of the word "lien" which ordinarily refers to a right to retain possession of a chattel until payment of a sum due from its owner. By extension the word may cover a right to property, such as a debt owed for sub-freight or sub-charter hire, which is assigned by the person to whom the debt is owed as security for an obligation, which he owes to the assignee. The debtor, once he has notice of the lien, may not make payment to his creditor if the obligation to the lienor is unpaid; and the lienor may claim the debt in fulfilment of the creditor’s obligation to him. That that was the basis of the lien appears from the judgment of Lloyd, J, as he then was, in Care Shipping v Lamsco ("The Cebu") (No.1) [1983] 1 QB 1005.

Contractual right

38. The alternative view, propounded by an article by Dr Fidelis Oditah entitled "The juridical nature of a lien on subfreights" [1989] LMCLQ 191, is that adopted and expressed by Lord Millett, giving the opinion of the Privy Council in Agnew v Commissioners of Inland Revenue [2001] 2 AC 710, that the lien is a creature of the maritime law and is "a contractual non-possessory right of a kind which is sui generis". The basis for this analysis is that, if the lien is a charge, it is of a kind unknown to equity. An equitable charge would confer a proprietary interest by way of security, so that, if the subfreight was paid to a third party – at any rate if he had notice of the lien – he would be bound by it. But a lien on sub freights is defeasible on payment. In expressing the view that he did in Agnew v CIR Lord Millett espoused, by way of judgment - obiter but in an opinion concurred in by Lords Bingham, Nicholls, Hoffmann and Hobhouse - the submission which, as counsel, he had unsuccessfully advanced before Nourse J, as he then was, in The "Ugland Trailer" [1985] 2 Lloyd’s Rep 372.
39. It was common ground before Lloyd J that the mechanism which required sub-charterers, if given notice, to pay the owners was an equitable assignment of freight due under the sub-charter. Kerr J had said something to that effect in The Nanfri [1978] QB 927, 942. In the House of Lords [1979] AC 757, 787 Lord Russell of Killowen said: "The lien operates as an equitable charge upon what is due from the shipper to the charterer, and in order to be effective requires an ability to intercept the sub-freight (by notice of claim) before it is paid by shipper to charterer".
40. Lloyd J was satisfied that the assignment, although by way of security, was an absolute assignment for the purpose of section 136 of the Law of Property Act 1925, following Hughes v Pump House Hotel [1902] 2 KB 190. He thought that the legal analysis might be different if the true nature of the lien was that it took effect as an equitable charge but, in the light of the arguments presented, he did not find it necessary to consider that possibility further. In The "Spiros C" [2000] 2 Lloyd’s Rep 319 Rix, LJ said that the nature of the lienor’s rights "is thought to be an equitable assignment by the time charterer to the shipowner by way of security".
41. Owners did all that was required to perfect their lien over the sub-hire payable under the SeaTask charter, by giving notices of lien to OceanTask c/o SeaTask as in The Cebu (No.1), cit. There was no need for OceanTask to give its own separate notice to SeaTask. Those notices were given on 10 January, 17 January, 7 February and 5 April 2012. All of Owners’ claims against CMT were due under the CMT charter as at the date of that last notice. Substantially the whole of the Owners’ claim for the balance of hire under the CMT charter was due as at the dates of the earlier notices.
42. The Ugland Trailer [1985] 2 Lloyd’s Rep 372. In that case Nourse J held (by way of ratio) that the shipowner’s lien on sub-freights was a form of equitable assignment made by the charterer by way of security for what is owed by the charterer to the shipowner, and, being an equitable assignment of a chose by way of security, created an equitable charge on the chose. The assignment was necessarily equitable because it was made in the charterparty without notice (at the time of the charter) to the shipper. He rejected the submission of Mr Millett, QC that the shipowner’s inability to follow the sub-freight into the hands of the charterer demonstrated that the lien gave the shipowner no proprietary right to the subfreight on the basis that the submission confused the nature of the right with the event which defeats it. He held that, if the shipper made payment of the freight to a third party with notice, "it could not be doubted that the shipowner could follow the money into the hand of the third party". But he could not do so once payment was made to the charterer because that was the event which defeated the right. The equitable charge was one that required registration under the Companies Act.
43.In The "Annangel Glory" [1988] 1 Lloyd’s Rep 45 Saville J, as he then was, had to consider whether the Ugland Trader was rightly decided. He decided that Tagart (in which, as appears from reports of the case in 88 LT 451 and 72 LJKB 202 there had been argument as to whether the lien was in truth some form of charge or other equitable right) was concerned with the extent of the right and not its nature. I agree. He rejected the argument of Mr Richard Aikens QC, as he then was, that the lien clause simply gave the owners the authority of the charterer to collect the sub-freight. As to the further argument that at the time of the charter there was nothing to assign, he held that that was not determinative. The parties could agree to assign future choses in action and if they did so, once those choses in action came into existence, "the assignor automatically and immediately becomes a trustee and the assignee the beneficiary of that chose in action". He held that clause 18 in its unamended form constituted an agreement by the charterers to assign to owners by way of floating security the right to payment of sub freights falling due under contracts to be made by the charterers in respect of the vessel the subject of the head charter. He also held that clause 18 created a floating charge on a specified part of the charterers’ property namely sub-freights to become due to charterers in respect of the vessel and was registrable.
44. In The "Attika Hope" [1988] 1 Lloyd’s Rep 439 Steyn J, as he then was, was content to adopt Lord Russell’s description of the right in The Nanfri. In that case there was a conflict between the owners and the assignees. The latter had given earlier notice of assignment and, under the rule in Dearle v Hall, they prevailed. In The Cebu (No 2) [1990] 2 Lloyd’s Rep 316 Steyn J referred with approval to The Ugland Trader, The Annangel Glory and The Attika Hope, whilst holding, contrary to the decision of Lloyd J in The Cebu No 1 that "sub freights" in clause 18 did not cover sub-time charter hire. Since the present case concerns the amended clause 18 which covers sub-hire, that question does not here arise.
45. In Samsun Logix Corp v Oceantrade [2008] 1 Lloyd’s Rep 450 Gross J, as he then was, found it both unnecessary and rash to enter into territory disputed by (inter alios) Lord Millet and Nourse J.
46. In Cosco Bulk Carriers v Armada Shipping [2011] EWHC 216 Briggs J considered the juridical nature of the lien on sub-hire but did not find it necessary to decide between the rival theories. Lord Millett’s view.
47. In Agnew Lord Millett said that the inability of the shipowner to enforce the lien against the recipient of the subfreight arose (i) irrespective of the identity of the recipient; and (ii) not because payment was the event which defeated it but because the right depended on an underlying property right that the lien did not give.
48. As to the first, Nourse J had thought it indisputable that under the lien clause the shipowner could follow the money into the hands of a third party i.e. someone who was not the person to whom the sub-freight was payable, such as the charterer or his agent, if that third party had notice of the lien. I have doubts about that. The right is, on one view, an assignment by the charterer of the future sub-freight. If payment of that sub-freight is made to the charterer the right ceases to exist. There is no longer any freight due to which it can attach. Nourse J’s example would appear, therefore, to cover the rare but not impossible case in which the freight (or, in different circumstances, sub-hire) is paid to the person who is not the charterer or his agent. In such a case
(a) it must be doubtful whether the payment of a sum equivalent to the freight/hire due to a person who was not entitled to receive it is, in truth, to be characterized as a payment of freight/hire, whatever the payer might have thought or called it; and
(b) if the freight/hire has been paid to someone who is not the charterer or his agent the charterer’s right to it remains. He has not been paid. If, however, payment of that sum to such a person is properly to be regarded as freight or hire paid as such I do not see why it cannot be followed if, but not unless, the payee has prior notice of the assignment.
49. As to the second, I do not see why the clause cannot be regarded as amounting to an agreement to assign future debts by way of security, which gives rise to rights in equity: Taillby v Official Receiver [1888] 13 App Cas 523; In re Lund [1915] 2 Ch 345. The right cannot be exercised if nothing is due to the owner and, being an agreement to assign a debt, it cannot subsist if the debt in question is paid without notice of the assignment. Although the lien provides an immediate security interest at the date of the charter, it may be that it creates no proprietary interest in favour of the owner until the owner gives notice[1] because, until then, it is open to the charterer to claim the debt in the ordinary course of business[2]. The assignment may, in respect of an English Corporation, be registrable and void for want of registration against a liquidator and creditors; and there may be questions as between different competing claimants to the debt or the monies representing them[3].
50. But none of that seems to me to be a reason to hold that there is no assignment at all. In Agnew Lord Millet described the lien as similar to a floating charge while it floats but incapable of crystallization and said that the lien did not give any property right. I do not, however, with respect, follow why the lien is incapable of crystallization by notice from the owner so that, upon notice, gives rise to a property right.
51. Further, if the right is only some form of sui generis contractual right it is one of restricted use. It would give the owners no direct claim against the sub-charterer; but only a right to have the charterers restrained from receiving the sub-charter hire or ordered to direct its payment to the owners or to a blocked account. (If the account was that of the charterer’s solicitors the right would probably be lost: see Samsun Logix). It may be that the sub-charterers would be in contempt if, with notice of the injunction, they made payment to the charterers, and it may be that they could be joined in any action against the charterers for the purpose of securing protective relief; but there would be no direct right of the owners against them.
52. In those circumstances, on the assumption, which seems to me correct, that it is necessary for me to decide the question, and, with a degree of trepidation in advancing into territory into which Gross J felt it rash to tread, I prefer to hold that the clause creates an assignment by way of charge[4], following the authorities at first instance decided by distinguished judges of this court which must have been acted on as authoritative for many years. I am fortified in so doing by the analysis in an article "Liens on Sub-freights" by Graeme Bowtle in 2002 LMCLQ 289. At the lowest it is well arguable that that is the correct analysis.

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