Demurrage Time Bars revisited

Lukoil Asia Pacific Pte Limited v. Ocean Tankers (Pte) Limited (“Ocean Neptune”)

[2018] EWHC 163 (Comm)

Following on from our recent article Click here

the question of demurrage time bars has again been the subject of litigation, this time on appeal from an arbitration award to the Commercial Court.

The vessel was fixed on the ExxonMobil VOY 2005 form with rider clauses. The relevant clauses were as follows:

Clause 13(d):

Charterers shall pay demurrage …. for all time by which the allowed laytime ….is exceeded by time taken for loading and discharging and for all other Charterer’s purposes and which, under this Charter, counts as laytime or as time on demurrage”

Rider Clause 2:

“…. Charterers shall be discharged and released in respect of any claims owners may have…. such as but not limited to …claims for demurrage…. unless a claim has been presented…with supporting documents…within 90 days……. For demurrage claims supporting documents must include whenever possible……the statement of facts for each loading and discharging berth which must be signed by the Master or the vessel’s agents and whenever possible, the terminal….”

Rider Clause 3:

“…. statement of facts must be signed by…. the receivers, if possible. If not possible then Master to issue a letter of protest…submitted together with Owners demurrage claim.”

Rider Clause 4:

“if Charterers require vessel to interrupt her voyage waiting at anchorage further orders, such delay to be for Charterers’ account and shall count as laytime or demurrage, if vessel on demurrage. Drifting clause shall apply if the ship drifts”.

Owners brought arbitration proceedings against charterers for demurrage of just over US$770,000. Most of this had been incurred after a delay at the first discharge port, due to a cargo dispute between charterers and receivers. After tendering a notice of readiness, and berthing for a day, the vessel was sent back to anchorage where she waited for orders for over 40 days.

Although owners brought their claims for demurrage within the required 90-day period, they did not provide countersigned statement of facts for the ports.

The tribunal found that owners’ demurrage claims were time barred as they had not provided all the supporting documents required under clause 2. However, because owners had re-labelled the claim at the first discharge port as time lost waiting for orders under clause 4, the tribunal treated this claim as falling outside the requirements of clause 2.

Charterers appealed the decision and whilst acknowledging the experience of the tribunal, Popplewell J overturned the award.

The Judge said his task was to ascertain the objective meaning of the language which the parties chose. He had to consider the language used and decide what a reasonable person would have understood the parties meant. The court must consider the contract and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used.

Clause 2 applied “for demurrage claims”. The question was therefore whether a claim under clause 4 was a “demurrage claim”. The Judge held that the language of the charter provided in clear terms that it was.

What is meant by a claim for demurrage was found in clause 13(d) – “Charterer shall pay demurrage….” It provided that demurrage was to be paid for time by which the allowed laytime “is exceeded by time taken for loading and discharging and for all other Charterer’s purposes and which, under this Charter, counts as laytime or as time on demurrage.”

The language of clause 4 provided that delay caused by waiting at anchorage shall “count as” used laytime or demurrage. The waiting time under clause 4 was, in the words of clause 13(d), time taken for charterers’ purposes which under the charter counted as laytime or demurrage. It therefore fell squarely within clause 13(d), giving rise to a claim for demurrage.

The Judge found that there was only one type of claim: a claim for demurrage for the time by which charterers exceeded the laytime for loading, discharging and for any other of charterers’ purposes which count as laytime or time on demurrage under the charterparty – including time spent waiting for orders under clause 4.

A claim under clause 4 is not only quantified at the demurrage rate, but is also qualified by the laytime otherwise used during performance of the voyage. If a claim arises under the clause 4 it is to count as laytime: to the extent that laytime has not otherwise been used, it will reduce the waiting time for which a claim can be made under the clause.

Clause 2 identified documents which must accompany a demurrage claim, which must be made within 90 days of final discharge. Such provisions are common in voyage charters. A court will give effect to the purpose of such clauses (see National Shipping Company of Saudi Arabia v BP Oil Supply Co (“The ABQAIQ”) [2012] 1 Lloyd’s Rep 18 at [60]- [61]).

The Judge noted that the tribunal focused on the fact that documents of the type envisaged in clause 2 might not exist in relation to the waiting place but did not find this helpful. Clause 2 is qualified by the words “whenever possible”, and since it would not be possible to send documents which never existed the clause would not apply. When such documents do exist in relation to a clause 4 claim, they will be relevant and necessary. If waiting at anchorage takes place after arrival at the port, there will be a notice of readiness and likely a statement of facts. That will assist in the investigation of events which give rise to the clause 4 claim.

It is not only the place where the vessel waits which is relevant. If the delay occurs at any stage of the voyage after notice of readiness has been tendered at the first loading port, it will be necessary to calculate what laytime has been used. In the present case, for example, the clause 4 claim for time spent waiting required a calculation of the laytime used at the loadport. The very purpose of clause 2 was to require those documents to be provided, and if they are regarded as necessary for a demurrage claim based solely on loading and discharging operations, there is no reason why they should be regarded as any less necessary for a clause 4 claim.

While one should give credit to owners’ creativity to get around time-bar issues, the reality is that this was a demurrage claim as defined in the charter party. It was helpful in this case that the charterparty expressly stated that demurrage was to be payable not only in respect of any time taken for loading/discharging exceeding the contractual laytime but also “for all other purposes” which, according to the Judge, included time lost waiting for orders.

Assureds chartering in on voyage basis should therefore aim at giving the definition of demurrage as wide as possible meaning while those Assureds chartering out as disponent owners must watch out for time bar provisions as Courts will have little sympathy with arguments attempting to treat certain delays as falling outside the laytime/demurrage regime.